You can enable TOGGLE_EN so that the LED turns ON/OFF on consecutive touches on the sensor.
As you have mentioned, you can control the active and inactive duty cycles through the PWM_DUTYCYCLE_CFG register. However, since the frequency is high, you could only vary the intensity/ brightness using this register.
In case, you would like to visually view the blinking effect in LEDs, I suggest you to enable host control and control the GPIOs in host firmware, depending on button touches.
Read the BUTTON_STAT register, when the HI pin goes low to find the detected button touches and control the GPIOs accordingly.