I recommended adding the diode in my post "022/711 switch operating pblms" for exactly the same reason you added the diode. Diodes are cheaper than lamps and I think the lanterns look better with the lamp at a lower voltage. I often run my switches from the 20 volt fixed output of a KW.
I use a blue crimp on lug for the fixed voltage plug. It is much cheaper than the Lionel plug and doesn't tend to fall out and I can crimp wires directly to it.