I've worked it out and the answer is more than a little embarrasing.
Firstly though, many thanks to all for the detailed replies. This has become an interesting thread and attracted more interest than I'd expected. Sorry for the late follow-up by the way - I've been up to my eyeballs in house move preparations.
Basically I should hand back my EE card right now!!! The reason the LED wasn't fully extinguishing is due to a stupid error in my scrappy breadboarding. In my stupidity, I'd managed to connect the capacitor terminal that should have been on the 0V net to the junction of the LED cathode and 220R resistor instead!!!
Now the design is corrected, all is behaving as expected
. I have also increased the current limiting resistor from 220R to stay a bit further from the devices absolute max source/sink current! D'oh!
With the aforementioned node swinging from approx 0V to approx 3V, I think the dimming effect makes sense. Will think it through some more in due course.
Many thanks once again,
Robin