I have the Ethernet shield working on modified the modified Twitter code
All the words make sense. The order and selection of words do not.
The arduino twitter account is monitored by my regular one and sends text messages for that one only.
"my regular one" refers to what? "for that one only" means?
Would it be possible to somehow reply via SMS with a single character and have the shield turn on an led?
Depends on what you do with your phone, what you send the SMS to, and what that server does with the text message.
Some code would be useful.