I am pretty sure you are encountering a problem sometimes referred to as PEBKAB (OK, I am joking here - Problem Exists Between Keyboard And Brain). Just kidding
SMS should work. It works on every other GSM BlackBerry. If voice works, then SMS should work. Perhaps the wrong number was used? What happens when you send a text message?
For the blinking light, check "Saved Messages" and your calendar and also check the browser for an updated web site. Both of those can cause the blinking light.
Personally I hate the blinking light, so I turn it off in my default profile.