The lights I used are 24 LED camping lights from Ozark Trail, which I found in the hardware section of our local store. They're nice because they run on batteries, no cords or electricity to worry about - and they're simple for the boys to turn off and on by themselves. I'm sure they could be diffused somehow later on to overcome that bright halo effect, but it's not bothering anyone here!
We did purchase a few manipulatives on sale from Discount School Supply - the window blocks and the animal X-rays are pretty great! We considered the laminated flowers and leaves, but I think we can make our own from some of the leaves and things we always seem to collect (in bulk!) on nature walks.
The big kid in our house is really into tracing right now, too, so he's digging the light source for that. All those other plastic bins sitting in my garage just holding stuff only wish they were having this much fun.