I'm currently using the same setup (with the exception of XP Pro instead of Home).
The mode change buttons are what's changing the LED's. You can (using the CH software) map completely different button presses to every key in each of these 3 modes. So you end up with like a zillion (seems that many, at least.

) possible presses. If you use the software, you can tell it to ignore the mode changes and use those buttons (the one on the upper right side of the FS and the joy/hat press in on the Throttle) just as normal buttons. It'll still change the color of the LED's, but the end program won't see any difference.
I find it's MUCH easier to use the CH software and have all of my different controls send just a letter instead of mapping the buttons within the game. The hats are mapped ingame, and I think my fire button is also, but beyond that it's all just sending keyboard presses. This allows me to more easily build similar maps for all the different flight games I play, often just copying one map to another and making a few tweaks. And keeps me from having to mess too much with ingame mapping and stick set changes for WB/AH.
If you need any help, feel free to ask away. I could e-mail you the preliminary map I've put togther for AH. I Just returned to online flying after a long absence, and am just getting used to CH stuff after years of Thrustmaster, but I think I've put togther a decent map. (Still have a preorder in for the TM Cougar stuff though.

CH will be relegated to the backup gaming machine.)
D