If you are talking about the red led on the inside of the m.pcb from I recall I've seen that lit on working units. I can't say for sure. Never paid much attention to it. I can find out though.
So the blower and heater are coming on during test mode and a cycle. And the clothes are still wet. And they are hot. The heat may not be being maintained throughout the entire dry cycle. You may have to babysit it through the dry cycle with a meter on the heater connectors or amp probe on one of the heater wires. You can also feel the duct to make sure it's hot. Naturally it's going to cycle on and of so it cycle from hot to warm. But it should not get cool. I don't know what the low limit temp is.
And just for the heck of it, while in the drying cycle, pull the drain hose out of the wall while it's drying to make sure it's draining occasionally. Also, for best proformance, the end drain hose should not be in standing water and should not rise more than about 12" above the machine.
Another thing is that there may be a restriction at the lower end of the exhaust duct. In the hose between the duct and the outer tub. The heater and blower heats up the clothes which evaporates the water in the them and carries that evaporate through the "condensing duct" letting it condense at in the exhaust duct through the bottom of the tub. Occasionally cold water is introduced into the tub to help cool the hot moist air that hits it. Thereby increasing condensation production. This last part I have surmised as it is the only thing that makes sense to me.