I was looking for something else and stumbled on this instructable where the author has an battery/resistor/LED combo and sticks the LED into the glue stick to diffuse it for a bike light. I looks pretty good and easy to make. However you may want to stick to high heat glue sticks, I can see this becoming a …sticky mess otherwise.
http://www.instructables.com/id/super-cool-bicycle-LED-tail-light-Fiber-Flair-glow/