I like this idea a lot, as I find I must keep reminding guest drivers what the LEDs mean.
However, I'd rather keep the flashing only for really important things.
I also think people usually visualise a fuel gauge as linear. 2 LEDs doesn't suggest running out to me, it suggests 2/3 full.
A linear scale allows drivers to visualise how fast they are using their fuel.
However, a less linear scale as you suggest gives more detail when it is needed (when fuel is getting low), so I understand your suggestion.
An alternate suggestion
LED numbered from left to right...
LED 1+2+3 = > 66% fuel
LED 2+3 is >33% <66%
LED 3 is <33% fuel
LED 3 flashing is the low fuel level as set in the software
The above percentages could be adjusted to bias it to the low fuel end of the scale, e.g. 100%, 50%, 25%
Refuelling in progress could be:
animation of NONE -> LED 1 -> LED 1+2 -> LED 1+2+3 -> repeat
much like the recharging animation of many battery powered devices
LED 1+2+3 flashing is penalty has been given
Those 3 LED go off when you enter the pit successfully to take the penalty. An added bonus, they could count down the last 3 seconds of your penalty, then return to showing fuel level a second or two after the 'Go!'
There are other ways the LED could be animated, but these suggestions keep existing PitPro functionality (showing penalties is excellent) whilst adding some more info about fuel level.
However, I do understand that adding animations is considerably more coding, and I don't see how to show more fuel detail AND keep existing functionality without animations.
The ideal solution may be a combination of mine and your approaches, or something else.