I have just read a very in depth post by Melanie about bits in bytes, and arrays etc...
I think I understood most of it.. and have changed my code to....

Code:
n		        VAR	BYTE
nn		        VAR	BYTE
cmd                            VAR            BYTE[16]

...

lcdout $fe,$C0," "
for n = 15 to 0 step -1
  CMD[n] = dout.15
  lcdout $fe,14,bin dout.15
  dout = dout << 1
next n

lcdout $fe,$d4," "
for nn = 0 to 15
  lcdout $fe,$14,cmd(nn)
next nn
However it still doesn't seem to have solved my problem. I am still getting the wierd character in the bottom lcdout array..