Bravo, Tom, on the first correct use of the word 'tortuous' in 2003 !
paneltec, you have two separate problems here.
The I/O LED on a ControlLogix CPU only indicates a failed scheduled connection, such as an I/O module being removed or mismatched. It does not indicate a failure of an unscheduled connection, like a DH-485 message or an RSLogix 5000 session. Look in the I/O configuration in the Controller Organizer and you're sure to find a yellow triangle with an exclamation point in it for one or more objects in the I/O tree. The 'connection' tab for these I/O entries generally gives you a good description of the problem.
You do not have to enter a DH-485 PanelView as an I/O device in ControlLogix. You do for I/O type network PanelView configurations like DeviceNet, RIO, and scheduled ControlNet and EtherNet/IP.
On my Logix CPU, the RS232 LED comes on solid green when I connect RSLinx via RS232 using the "1747-PIC/AIC+" driver. It goes off when I disconnect the cable. If I plug in with RSLinx set for the same node number as the ControlLogix CPU, I get a green LED that flashes off about every three seconds. This indicates a duplicate node number conflict, and is easy to remedy; just change the node number of the RSLinx station (or in your case, the node number of the PanelView terminal).
On simple DH-485 networks I generally make my programming software Node 0, my controller Node 1, and my operator interface Node 2. I then change my 'Maximum Node Number' from 31 to 2, in order to save on token-passing traffic.