As Steve said, you need to clarify this "T1" business. You have two points marked "T1" in your schematic. Normally this would mean they're connected together. If not, you should draw how they are connected. You also need to draw the fuse, and the igniter. Draw the whole thing so we can see how it fits together. You could also draw the TEST/LIVE relay for clarification.
You're right about the LED current flowing through the other resistors. Why don't you just return the LED cathode to ground? As Steve says, use separate resistors in the anodes, not a single common one in the cathode. If you return the LED to ground, it will indicate either red or green, according to whether the system is in test or live mode, at all times. As you have it connected at the moment, it looks like it's supposed to go out when the output is activated. Which behaviour do you want?
The drive to the MOSFET is right, but it would be a good idea to put the part number of the MOSFET on the schematic.
I'm not sure about the 12 ohm resistor between the MOSFET and the igniter. Are you trying to limit the current to 1A? That resistor will limit the drain current to 1A if the bottom end of it is shorted to ground. If you're driving the igniter from it, then the 12V will be split between the resistor and the igniter. Assuming the igniter is rated for 12V and draws 1A, it will have 12 ohms resistance as well, so the resistor and the igniter will each get 6V across them, and the current will drop to 0.5A. I don't think that's what you want. If the igniter wants 12V across it, you need to remove that resistor. You should have a fuse, say 2A, but not the resistor.