I cant see anything wrong.

When you say "with the default settings for the builder", do you mean you are
hitting the compilers "Default Build" button?
Or are you assuming the compilers setting are at default?

Try hitting the "Default Build" button with both Sun and Ambient values at
RGB 255,0,0. That worked for me.
What version of WED it is? (open WED hit ALT-H, ALT-A and post the whole
top line of the AboutBox contents)

Otherwise, is there no way to upload your level? If you can, upload all THREE
level files, level.WMP, level.WMB, and level.WED please. (no models required)