I can understand the confusion. It's actually a keyboard LED emulator of sorts for the panel, and it works exactly as you've observed. It would be nice if the set of displayed "LEDs" were user-selectable, but having that indicator on the panel is a huge plus for me.

I now have three circles on the panel where thare other system icons. One with an up down arrow one with the number 9 in it and the third with a capital A. They are nearly invisible as they are white symbols on a light gray background. But the caps lock turns the circle-A bright red, The Num lock turns the circle 9 bright red, and I assume that the up down arrow is a scroll lock but as my key board lacks a scroll lock key I have no way of verifying that.

But I said that there was one flaw. When I first boot the computer up I have to enter my username and password. As the computer is not yet booted up there are no utilities yet started hence That is one password that I am flying blind on as the icons for the various features have not yet initiated. However once I am up and running applications or browsing the net I do have a caps lock indicator, and That is when I use passwords the most. and of course during boot up that is when the computer wakes up with caps lock not yet activated. Though less than perfect the situation is a whole lot better and pretty much livable.

Thanks for the help guys! It is nice to have a community like you all.

It's been a while since I've used a login manager, but I know some of the login screens will warn you when your caps lock is on. I believe KDM does this.