If you have limited space and are going to use surface mount components, for the led/leds you can use PLCC-2 type.
I used them on my keypad interface PCB I made.
Take a look on my site
Jake's Electronics | Kits, Tutorials, Projects and More.
or search them on eBay. You can get some low mcd(brightness) ones pretty cheap.
There are stacks of ways you can do it and components you can use. This is just one suggestion.
I know some traditional people are against always reverting to a microcontroller, but it would be perfect for this situation.
- you can get your timing perfect for the on/off ratio.
- it can perform you fade in fade out function with a pwm
- some run off 3v
- 8 pin SMD chips are tiny
- they can sink/source up to 25mA which is enough to drive an led.
- minimal parts required, led, microntroller, 1 or 2 caps,battery, and a switch for function select.
Of course the downsides are you need the programming knowledge and hardware