Why use a transistor? Hook up the anode of the LED to +5V, connect the cathode to a resistor, then connect the opposite terminal of the resistor to the output. When the output goes low the LED turns on.

One characteristic of the 8051 output structure is that it can't hardly source any current. The output structure can sink significantly more current than it can source, so take advantage of that fact.

BTW, check the datasheet for VOL (Low Output Voltage) and see that it is below 0.45 under the specified conditions. I don't know why your LED isn't turning off. Maybe its the program? Check the errata - read-modify-write operations erroneously activate the pullup circuitry.

- Lee