Actually the problem is not just the front light; I also need to attach a bell but there is no space on the handle bar that doesn't interfere with folding! The bells I found are bigger (fatter) than a light that uses 2 AA's, so I don't know if they can be left on when folding the bike.
The idea of replacing the front reflector with a light is something I thought about but I don't find any battery-operated LED light that mounts there. Everything I found seem to be designed to mount on the handle bar...