LED ?

So whats the deal with the way daylight affects LEDs, specifically the infrared ones? I mean I understand that it is more diode than light. I have a cheap radio control helicopter that uses ir LEDs on the controller and it works great indoors but take it out in the sunlight and it goes crazy.

The LED itself isn't being compromised in sunlight, it's the IR photodiode/phototransistor in the helicopter itself that is being affected by the sunlight. More specifically, I would imagine that the receiver is being saturated with IR noise (among other wavelengths it may be sensitive to). To continue making assumptions about the device, the filtering is insufficient for outdoor use.

The commands from your controller are sent to the helicopter by modulating the IR signal.

I was just using my heli as an example.. most devices that use ir have an inside only warning.. but your explanation still covered that..lol