Hi, if you decide to use the LED-LDR idea, try this, here it is implemented in a compressor circuit, but all you need to do is detach the LED, and by applying varying current, different output levels can be achieved with low distortion. Making the LED current high, ie, bright, reduces the level it can pass. It will not go down to full mute however, but do try an ultrabright LED and increase that 2.7K near the LDR to get more level variation at the expense of some distortion.
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At a long shot, you could try to modify this for your application, I managed it with the filter schematic:
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Alternatively, you could try this OTA voltage controlled amp, intended for guitar use, I have no experience with this circuit though:[/url]