Last halloween I was very fortunate to find a quick LED lighting fix for two very large plastic pumpkins and two 29" tall grave stones. The LED Rainbow lights I purchased worked so well, I went back to the store and purchased the entire case they had in the event they don't make them for 2007.
Your project is also perfect for them. What also makes them great is the fact they contain 3 LED's, green, red, and blue. At the touch of a button, you can make any single LED turn on, any two, or all three, and either blink, fade on or off, or you can also just have all of them stay on constant. Or any possible combination you can think of for that matter.
They were purchased at one of those Party City stores. If used on batteries, they run for about 50-80 hours.
The photo didn't come out well of the unit, but it requires (3) "AAA" batteries or you can use a 4.5 volt power adapter. If you want to see them in action during my 2006 haunt, check out the two pumpkins and gravestones below.