If the diagram is correct.. you've got it hooked up way wrong. lol
On the switch, you're hooking up the GND and 5V directly... so that's the short I was talking about.
But regardless, with your LED's... uh, change that. lol The shorter end of the LED (also, the flat part of the LED) is the GND (-) that's got to goto GROUND directly.
The longer pin is the pin you want to connect to the Arduino pins, PIN7 ---> RESISTOR ---> + of LED
And your switch is hooked up wrong.. here's an example how to hook that up:http://arduino.cc/en/Tutorial/Button