I used to wire a capacitor into my homebrew LED lights to reduce the flashing, which worked fine, but I eventually gave up on that. The way the lights flicker at walking speed is annoying if you're trying to ignore it, but I don't want people ignoring me. Now I think of the flickering as a safety feature.

And yes, absolutely, go for it. Go with LED lights; incandescent and halogen aren't bright enough. Don't bother with a switch, just leave them on all the time; and don't worry about what dynamo hub you get. Any working dynamo hub is fine. I use 50+ year old Sturmey Archer dynohubs on a few of my bikes, and they're great. Newer ones are great too. It's all good.