I have as little idea about what actually happened as the next guy. I am simply glad this incident did not turn into a nasty accident.
Also, I believe that the raising of the gear resulted in the air-ground logic switching to Air mode, which resulted in the LED's driving to the normal positions by 160ft radio.
Surely you would be unable to raise the gear (without using the over-ride) if the air-ground logic was still in ground mode.
Were the REV indications only present once airborne, or did they show during the takeoff roll? It
could be that the inboard and midspan LE flap groups retracted during the takeoff roll, but then re-deployed once the gear tilted as it got airborne? Pneumatic movement of the flaps is relatively quick, but would still not be in position for a short period of the initial airborne time (during which the stick shaker would likely activate).