I think that the function of the extended base on the red lights in this generation of observation cars was to collect light from the car’s overhead lighting and use it to illuminate the markers; they had no separate light bulb although in some cases the tail light did. These are not fiber optic materials, just solid plastic, and I think were called light pipes. They really don't make the markers as bright as you might want.
Anyway, I did what the OP suggests and cut them down to mount led’s on the flat cut side, which certainly improved the light. I then actually drilled into the lenses to mount small SMD led’s inside of them, which was a chore but concentrated the light still further. That’s probably unnecessary for most people’s purposes given that the base was designed to collect light anyway, and led's are bright enough to provide plenty.
This video still shows how the lighting turned out. The tail light is actually a Mars light as per the original plans of this car, the Texas Special Stephen F. Austin, made using an Ngineering Mars Light simulator board; the car is aluminum-bodied from a Lionel set made some years ago:
