I have done it. Some considerations: the stated angle of the beam for the LED you have is focused as lens by the rounded end of the LED. It will be all over the place if you sand that off. Might be look you are going for or not.
You can sand the sides but stay away from the diode innards obviously or you will kill it.
Another solution to accomplish what you are possibly trying to do is use acrylic and backlight or reflect it though the acrylic.