When I read that, it looks like it says "while button 4 is pushed, go forward. While button 1 is pushed, go in reverse. If neither button is pushed, stop" is that not what's happening? Your description of the behavior isn't really complete to tell us what you want to have happen.
Take a look at the user manual for the spike, found here:
http://content.vexrobotics.com/docs/...uide-sep05.pdf
It describes the operation of the LED. It's been a while since my team has used one, but I believe it says kForward is green, kReverse is red, kOff is Orange, kOn is blank.
Double check the wiring and make sure it isn't shorting something when you push button 1, I've seen a short cause the LED to turn off before.