Matt

In the transmitting code. you turn the LED on with
LED=1

Then you enter the loop to send to the Port.

Then on the receiving side you keep reading the LED value.

and apply some logic

Code:
IF LED=1 THEN 'If LED equals 1, turn LED 2 on and 3
PORTB.1=1 'off, otherwise turn 3 on and two off
PORTB.2=0
ELSE 
PORTB.1=0
PORTB.2=2
ENDIF
Maybe you should check your logic and make sure it works on the LAB-X2 before you go to the Serial port.

I might comment out this - 'SERIN PORTB.4,T2400,[LED]: PAUSE 50' and toggle the LED on and off. Then go from there.