it happen a long time ago = lo sucede hace much tiempo - is this correct
The final "atrás" may be common in Peru, but it is redundant and it would sound unacceptable in many other countries, so it is better to use Heidita's or James' options, which are written in standard Spanish. In any case, sentences shouldn't be written all in capital letters, and "sucedió" and "atrás" should have accents.
No, it should be in the past tense: Sucedió hace much tiempo.
You can't use lo because the verb suceder is intransitive and does not take a direct object, which is what lo is.
HI Omar: It happened a long time ago= Sucedió hace mucho tiempo.