The main improvement I wanted to make was to move the power switch under one of the LEGO block's studs so that it was hidden and yet still accessible. The LED lights up when the stud is held down or when another LEGO block is attached to the top of the flashlight block.
So, read on to find out how to make your own LEGO Flashlight block!
Step 1: Supplies
1) A sacrificial LEGO block.
This will be the body of the finished block. It should be two studs wide and at least four studs long. For this Instructable, I'm using a 2x4 block, but longer blocks work a bit better. Be aware that you're going to be cutting and mangling this block, so make sure it's not one you're too attached to!
2) One or two flat plates.
These will attach to the bottom of your flashlight block, keeping all of the internal "guts" inside and out of harm's way. If you use just one plate, it should match the size of the block used for the body. In this Instructable, I will be using two plates. One will be permanently glued in place and the other will provide access to the batteries in the block. If you decide to use two plates, you will need a 2x2 plate (or larger) for the battery cover and another plate to fit over the remaining portion of the block.
3) Two LR1130 coin cell batteries.
These will provide power to light up your block. LR1130's (or equivalent) fit perfectly in a LEGO block and provide enough power for one LED.
You should be able to find these at Radio Shack (here's an equivalent battery: http://www.radioshack.com/product/index.jsp?productId=12400059) or probably much cheaper online if you look around.
4) A 5mm LED of your choice.
Any LED with a forward voltage drop of 3.0 volts or less should work. I've successfully used super bright white, red, and green LEDs, but your experience may vary.
LEDs are also easy to find at Radio Shack (here: http://www.radioshack.com/product/index.jsp?productId=3060980) or online (I've purchased oodles from eBay). Alternatively, you may be able to scrounge one from some old electronics. Bonus points for reusing!
5) A 6mm PCB pushbutton.
This will be pushed to activate the light.
Again, these are available at Radio Shack (this one should work: http://www.radioshack.com/product/index.jsp?productId=3060978), or online. However, they are fairly ubiquitous in electronics, so you may be able to rip some out of some of that junk you've been collecting. I scrounged 10 or so out of an old alarm clock, and they work perfectly!
6) A small length of wire.
You'll want about 6 inches or more of solid-core copper wire that is flexible but stiff. Telephone or CAT-5 wire work great.