Hey I am new to this game and I was wondering when I play Multiplayer games on my Lan all the bots have the same look as my character. Is this normal?

The same thing happens on the other systems that are on the LAN. The bots are the same on that system as the characters that the other users view.

Can anyone help? Am I doing something wrong in setting up the server? It is not a dedicated server does that make a difference?

Go to your Setup, and I think it's on the "Other" tab, turn "Force Player Models" to Off. If it is already off, I can't think of anything else except to reinstall and apply the 1.04 patch.