It used a 120k resistor and simple shorting switch from the bottom of the drive pot, 1k, 470p, 12n, 12n, and bottom of the level pot, to earth. When the switch is open all the foregoing components were lifted by the 120k resitor - hey presto bypass mode. When the switch is closed: bingo, tons of boost.
To add an LED on/off indicator, I would suggest using a DPDT switch. One side can be used to bypass the effect, and the other side for the LED.
As many know, an updated version of the Hot Cake was released in 2003. This has a presences control instead of the mids lift/normal switch in the original, and has a more Fender-like sound compared to the Marshall-like sound of the original. Many say that as you turn the drive control up, the tone gets muddy, but with the volume cranked and lower drive settings, the Hot Cake really shines. I've added a polarity protection diode, a power filtering cap, and a resistor for the LED on the board. For more info, check out the FSB summary page.