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I really know nothing about dredge because I have never played a dredge-like deck in any format of magic, but having played against it myself and seeing others' pilot the deck, it seems like Lion's Eye Diamond is the single most important card in legacy dredge. Being able to dump your whole hand turn 1, play a creature, and then trigger all your amalgams and narcomoebas is just nuts. Without LED, this is basically a modern dredge deck.
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I've played dredge for a long time in modern starting with the earliest builds arround "just" the dreadge mechanic and later using Lion's Eye Diamond in the way you described to one-shot the hand having 4 blue mana left to either play Carefull Study and Flashback into Deep Analysis or sacrificing Cephalid Coliseum for another draw on the same turn. The good old legacy dredge was getting enougth flesh on the board to cast into Dread Return and getting lots of tokens via Bridge from Below and Flame-Kin Zealot to finally hit the opponent. There is also the manaless variant discarding cards from your hand and cast Street Wrath's cycle ability to dredge for life.A (more or less) budget replacement for Lion's Eye Diamond is maybe Anvil of Bogardan because it's ability lets you draw additional cards and on the same turn discard a card with dreadge in your end step or you try Dangerous Wager or Whele of Fortune to discard your whole hand and start dredging. Drowned Rusalka is a good choice to get rid of useless Narcomoeba. I played this in Modern for a while in order with Magus of the Bazaar to mimic Vintage Bazar of Bagdad dredge deck.I don't think you can easily port a modern dredge to legacy format because legacy has way more spells to build a defense against your deck, you should add such spells that have an alternate casting cost like Cabal Therapy to get rid of nasty cards that could block your win con and even get another wincon in budget play is far more important