This is correct. The shape of the mouldings that the "fibre optic" fits into means that we can control the direction of the beam, so most of the light is aimed down onto the the tread of the next step down, with little glare coming upwards, certainly not straight into the eyes.
Yes, that's the problem, the auditorium steps at the top of the rake illuminate the stage sufficiently that you can easily see people moving around, like having worker blues on, while those lower down illuminate the backs of the seats in the stalls enough that it's really distracting. Since these are courtesy lights, not emergency lights, we dim them during the performance, so that the "splashback" is minimised, and the stage isn't lit by them. You can still see the steps and floor in the dark to move around, because they're not off completely, but when the aud lights are on we raise the level as a courtesy so the step edges are still brightly lit.
You can get an idea of just how much light a standard LED puts out from a show I did where we had individual 10mm white LEDs set into a set piece to twinkle like seaside festoon lights. They were run at 30mA and, from the stage, you could make out individual pools of light on the auditorium walls 30-40 feet away.