It can be done and they can be controlled by the reversing unit to make them directional.
Look for natural light or incandescent looking LEDs. I have ~50 if you need some. You will need to put diodes and resistors in series on the cathode side and a diode on the anode side to protect them for over voltage and reversing current.
If you go to the O Gauge RR magazine forums and ask there I am sure someone can put together a schematic for you.
Ed
From: "don448@aol.com"
<don448@aol.com>
To: ttat-members@aoot.com
Sent: Thu, April 1, 2010 1:49:21 PM
Subject: Electrical Question
I just purchased a Lionel 627 Switcher w/o headlights. I'd like to install front and rear lights but since the shell is plastic, I'm afraid of installing regular Steam Engine bulbs. Is there a LED bulb that would do the job and if so, can anyone give me instructions for wiring it up? Thanks for any help.
A member in need !!