Actually I have found something strange about your xml, it does not seem to matter whether I have active High or Low for the Z Home, the LED only lights when activated. I do not know why this is, will keep looking to see if I can figure it out but possibly setting up a new xml from scratch would be the best idea.
Hood
EDIT
I have just tested with another standard XML and it seems to act the same which may be a Mach issue, can you try changing the active state to see if it works correctly, just be ready with the E-Stop in case it doesnt. I will see if I can find the issue, if not I will inform Brian and see if he can figure out where the issue is as it seems to be Mach at this stage.
What version of Mach are you using?