I don't know anything about the Wave Shield... But, I have made some audio activated lighting effects...
How are you wired-up? I assume you need to feed the audio output from the Wave Shield back into one of the Arduino's analog inputs.
Or, you might be getting enough voltage out of the Wave Shield to simply connect an LED to the Wave Shield's audio output (through a resistor) if you are not too picky about the brightness. (The LED won't be as bright with an analog signal, since there is an upper current limit for the LED, and typical audio signals have low average levels compared to their peaks.)
Or if you are playing the same sound every time, you can hard-program the timing of the LED to sync with the sound.
If you feed the audio into an analog input, be sure to add a protection diode to "short-out" the negative-going part of the audio waveform going to the Arduino. (Negative voltages can damage the Arduino.) And, add a resistor (maybe 1K - 10K) so that the diode doesn't "short-out" and damage the Wave Shield's actual output.
One of the simplest effects I've made simply compares the audio input (actually through a [u]peak detector[/u]) to the 20-second moving average. If the signal is greater than average, the light gets turned-on, otherwise it's off. This gives a blinking effect to the sound/music that automatically adjusts to the volume. In my program, I read and compare the audio input 10 times per second and turn the light on or off. Once per second, I store the value in a 20-element "rotating" array/buffer and re-calculate the average.