If you want to do a flashing light bar, I highly recommend this: http://www.hobbypartz.com/41p-police...ight-Bar-2.jpg

It does run on 9v though, but you might be able to hook it up to a 2S lipo if that's what the model uses. If your model is really small, this light bar could be too big. It's for a 1/10 scale.

My other thought is you can buy pre-wired flashing LEDs that come in multiple colors on eBay, none that change colors from what I've found. You'll have to solder your own harness together and find a way to mount the lights as you desire, but with the right designs and figuring, you should be able to accomplish it going that route. I don't think watch batteries are going to be a very easy route or last very long at that. I think you'll have to find a more powerful power source such as the main battery or a 9v/(4) AA to get any kind of decent battery lifetime.