So we have a robot that goes forwards, goes backwards and also turns right and left (albeit to go right we have to turn left on the controller and visa versa). No matter which combination we try we cant sort it so any ideas let me know but for now we can cope with that!!
Oh excellent! What was the change in the end?

Some transmitters have a flip switch on them so left becomes right and right becomes left. I have this problem with Shu! but to be honest, I can live with it being opposed for the time being.

1. Is the diagram below and the removable link setup correct? (ignore the link soldering and Ill have a proper go once I know what I am doing!!!)
Yep, looks good to me.

2. I am struggling to think how to put the LED in. The wire for the LED (14v) is so thin compared to the other 8 gauge wire that is used for the rest of the robot. Can anyone help me with this?
So the LED, as far as I understand it, will only draw as many amps as it needs when wired into the circuitry (a bit like the motors). Since the LED only requires a tiny amount of current to make work, it doesn't need a very thick wire.