An “inserted” status indicator application for Yubikey is fully doable (and quite simple) to write but such functionality would normally not be available in most cases because one of the most liked benefits with Yubikey is that it does not require any installation of any plugin/driver or application to work out of the box. However, an optional local indicator application is a good idea and we will bring this forward to Yubico Product Management.
Also, if you are interested and are using Windows/InternetExplorer, then you can easily use the current Yubico COM API to implement this function by reading the ykIsInserted property. This returns TRUE if a Yubikey is present.
For additional information, please visit the following link and look for “Windows COM/ActiveX Personalization Library v2.1.1”
http://www.yubico.com/personalization-tool