LED lights are just fine for city use.

My favorite battery light is the NiteRider Minewt USB. I attach it to one of the fork blades of my bike and use the extension cable that came with mine to run the battery pack up to the top tube. If you do that, I suggest adding a "be seen" LED light to your handlebars just so its in a more visible location (though, honestly, I've never done that)

I, however, highly recommend getting a dynamo setup if you intend to do lots of night riding. I love my dynamo lights. I use a B&M IQ Cyo R N for my front light. It is, hands down, the best light I've ever had for riding in a city. Plenty bright, relatively inexpensive for something that'll last for ever. The beam pattern is a nice rectangle that lights up just enough of the road ahead of you.

Seems like I always find myself making trips at night somewhere, so the dynamo setup has saved me tons of headaches with recharging batteries and what not.

*Waits for the inevitable Magicshine suggestion*