Actually, the native text messaging software is VERY limited in its use (as you have found out). There is no way to change the sound, or the LED color. However, all is not lost. Go to the market and download Handcent (spelled just like that). This app gives you the flexibility to change just about everything - the color of the LED, the sound it plays for each contact (from your own music files as well), to even custom alert icons (for example, my wife has a green envelope, my sister has a pink voice bubble, etc.). The app is free and EXTREMELY easy to use. One thing you will have to do though is to go to your current messaging app, click the menu button (the four squares at the bottom left), go into settings and turn off notifications - otherwise it will over-ride your Handcent settings (and you'll start to get duplicates). Oh, and Handcent allows for limited emoticon use. :-)
Handcent sms HomePage --sms plus software for android
Don't be afraid to ask for help - there is a ton of it here and a lot can be confusing.
Enjoy your R2 unit!
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