This will probably sound like a really stupid question, but what's the difference between the litec engine SED that comes in gamestudio and the atari litec you can download on the download page?

SED is not a Engine

SED is the shortform of

Script Editor

The Editor is made by atari...
And SED is a lite-c writing tool. So there can´t be a difference, because lite-c needs the atari script editor ^^

Don't wanna be a nitpicker here Espér, but the SED was there way before Atari. Its made by Conitec (afaik).
But you got the rest right. SED is just an editor to write code (C-Script or lite-C) and run it using the Acknex engine.

edit:
To answer your question nigel:
the atari free lite-C version is a package including the SED and the acknex engine, but it lacks some features which the Conitec version (3D Gamestudio) has.
Of course it lacks the MED and WED. But you can download the MED for free aswell.
So the only editor you don't get for free is the WED.
However its not only the number of editors which is restriced, also the engine lacks some features and commands as far as I know.

As long as we're picking nits...

Atari was around long before SED but SED existed before Atari got involved with it.

well thanks everyone. but it doesn't matter who was around first; atari wins 'cause they invented donkey kong.