hmmm are you any good at looking at circuit boards and figuring out whats what?
Not perhaps the most constrictive comment Boomtheroom, many of us here have been in research and develepment or industry for longer than transistors have been around, we know what we are talking about!
What we don't have is a schematic for your circuit board so we can only make guesses at what may be wrong based on information you provide. Please understand that how you measure components with a test meter will change the results you see. To measure a component, a test meter has to produce a voltage across its probes and monitor how much current flows between them and each different model of meter uses different voltages and different thresholds that start the buzzer. That's why we need more detailed information to be able to help you, we still don't know what your meter is telling you.
Usually, but not always, when testing on a 'diode' range, a meter tries to pass a fixed current across the probes and it returns the voltage it sees across them, its what we call the 'forward voltage' or 'Vf' of the diode when the polarity lets it conduct. However, it isn't foolproof, especially when measuring a component wired into a circuit like your LED because it can't tell if other components are influencing the reading. By far the most likely cause of your problem is the LED itself but it could for example have a capacitor across it that has failed with a short circuit. The meter can't tell which it is if they are connected together.
Your best option is to remove the LED from the board and test it in isolation, if it is faulty, a new one is very inexpensive. Make sure you note which way around the legs are, there is usually a flat edge on one side of the LED body to tell you the orientation. It will not light if wired backwards! If it isn't the LED at fault, you need to trace out the schematic around it to discover where its source of power comes from. There is no way we can do that for you I'm afraid, it is up to you to do it.
Brian.