1) From the pin names of the LS148, the order of priority is 7, 6, 5, 4, 3, 2, 1. 0 Inputs are unresponsive, so there will be only 7 operable switches input from the LS148. In fact, an 8th operable switch can be added, along with its highest priority level.
2) The light-emitting diode also requires a current-limiting resistor;