[aeastet]

Okay so if I am understanding you correctly you are telling me about software LED and not hardware LED's correct?

These software LED's should have nothing to do with Encoders unless you somehow use the encoder input to drive a light. There are encoder examples int he LabVIEW help file that should get you started with encoders. Generally encoders will have four wires. They will need to be connected to two DI on the RoboRio. There will be a +5VDC and 0VDC and two signal wires. Each Signal wire should go to a different DIO channel (i.e. DIO 0 and DIO 1). From there you will need to set them up in the begin file and then you need to read them in your code.

I hope this helps as I am really not understand exactly what you are trying to do. You should not need a launchpad or Arduino to get an encoder to work on your robot.