"I assume then that the same happens when on an intercept to our flight plan "magenta line" while in HDG mode, and engaging LNAV? LNAV light goes ON but the HDG light will once again remain ON until the A/P captures and tracks the magenta line?"
If you are on an intercept HDG( within 90 degrees ), and you have sequenced an Intercept TO Leg, by pressing LNAV the light on MCP will illuminate and the FMA will annunciate L NAV in green and the HDG mode and light will extinguish.