Suggestion for LEDs for the PWM outputs.

Could someone suggest an LED from digikey to use in the LED example?
Or would the following
be an acceptable LED for PWM outputs.

There is no special requirement for you to find special LEDs if you want to run them with PWM output. Any LED will be ok as long as their bias voltage is less than 5V. You just need to stay within current rating of the I/O ports and overall rating of the atmega328.