I recently found out my rear blinky light, (a Blackburn Mars 3.0), is not as water resistant as I assumed. The gasket that seals up the two halves of the housing is in good shape. Is there some sort of grease I can put inside that is friendly to electronics but also water resistant? Or perhaps fenders may be a better option? I realize the placement is not friendly, as the light gets hit by all the water thrown up by the back tire.

Maybe a plastic bag and some rubber bands? Idk.

I would try something like this:


or just plain old Vaseline.

Silicone grease.

I think just about all greases are both water resistant and electronics friendly, it's more the mess I'd worry about. I second the Silicone grease.

Tape it?

I don't know about you but the Schwinn will have a Honda taillight. Wonderful rubber gaskets or silicone/rtv(?) gasket (like Mr. Gasket) sealant like you use for your engine would do?

Automotive dielectric tune-up grease. It's intended to keep moisture out of spark plug wire boots
and out of the contacts inside a distributor. Just as messy as any grease though.

A fender will work just fine, your front derailleur and bum will thank you as well.

After you grease the seam, fenders on front AND back......with mudguards will help keep the water, dust, and grime to a minimum.

You should lube . . i mean grease it.

my underwater camera housing calls for silicone lubricant, but just a thin coat. which means only enough so that the gasket or o-ring is not dry to the touch

for my rear plantbike superflash I use a single layer of scoth tape all around each time I ride in the rain. plus the fenders made a BIG difference! after rainy rides I always open it up and let it dry out.