My question is - what (aside from friction) keeps the weight from accelerating? The interviewer states that the LED acts like an escapement in a clock, i.e. prevents the voltage from increasing which makes the generator harder to turn. I mean, the diode has a pretty much constant voltage drop, but what provides the torque to counteract gravitational acceleration?
When a generator produces a current there is an electromagnetic force that opposes the inducing action - it is an example of Lenz's Law in action. If you've ever tried turning a hand cranked generator you can really feel the difference in the amount of force required when there's an open circuit and when there's a load (or a short circuit).
In this case as the generator spins up the current increases until there's enough current so that the resisting electromagnetic force (plus friction) matches the driving force of gravity.