The LEDs are only indicators of which motor is on at which time. They can be put on the top of the robot so that you can see them, but they can be eliminated if you wish. They are really only there for aesthetics. The circuit I actually used was a little different in the sense that it had a 10K trimmer potentiometer to balance the sensors, and the LEDs helped to show when they were balanced. You may be able to find a copy of this circuit somewhere on
David Cook's website or contact him to ask for the schematic. I found his circuit to operate rather well.
Though you could eliminate the other LEDs, it would be a good idea to have bright white LEDs at the front between each set of sensors to act as a sort of "headlight." This would illuminate the floor better so that the sensors can "see" the line better. This, also, is in David Cook's design.
As for the LDR sensors, they are bent to face toward the ground, approximately 1/4 inch from the surface. This will allow the white LEDs to light up the floor enough to help the sensors sense the line.
I hope this answered your question!
Der Strom