How are you back to square one? If you get a circuit that's small and has the functionality you want, then you're as square 2 as far as I can see. I don't know of any circuit that fits around a cable. You'll need at a minimum a small vector board and small enclosure. If you need it to wrap around a cable, then I don't have a good solution.
You might be thinking of some type of production device made with surface-mount components; I've seen some amazingly small circuits, and it's probably possible to make one small enough to just shrink-wrap alongside a cable. But you're not going to achieve that with DIY components, which are quite a bit larger. But it can certainly be made small enough to go somewhere on your bike. Just not in-line with the cable as you seem to want.
(Just saw your latest post: 1/2" x 2-3" is certainly do-able.)
Because he wants light #1 to blink, and I know of no realy that blinks a light. Even it one did, it would not be a good solution. The circuit is not complicated, just a timer and a FET. Sorry no schematic yet, my time is very limited. I'll try to get one soon, but I do know that others have stuff like this already available, so please ppl, jump in here if you do.