I use the flash mode on the headlight during the day only, taillight always, aiming the headlight so it's not directly in people's eyes.

I drive for a living, and am not bothered at all by the flashing lights I see other cyclists using; it would bother me at night however.

Due to living in a temperate Rainforest, the lush vegetation can make seeing cyclists, or dark coloured cars difficult, even a sunny day as one's eyes adjust from bright light to shadow.