What kind of bike light is best?

Don't worry about blinding anyone. Car headlights are much brighter than anything you can reasonably put on your bike! If you must ride on sidewalks (which is generally considered a bad idea), just make sure to aim the light low enough so it isn't pointing straight in pedestrians' eyes at point blank range. I like the http://www.mec.ca/AST/ShopMEC/Cycling/Lights/PRD~5016-909/planet-bike-blaze-2-watt-led-front-light.jsp. Cheap, bright, takes batteries (so you can use your own rechargeables, rather than using a built in battery which eventually will fail or lose capacity and need replacing, at which you'll discover that you can't easily replace it and have to toss the whole thing). I find this light plenty bright for riding around town. If I were going to upgrade, I'd get a second one and aim one a little lower.

As a pedestrian who regularly uses bike/walk trails and the family member of multiple epileptics, blinky lights even on the rear (though especially on the front) are painful, distracting, and potentially seizure-inducing to look at. I regularly need to avert my eyes when being passed by some winter cyclists in the morning and early evening.

Yeah blinkys are utterly useless imho and I can't understand the enduring popularity. Get a white front right and a red tail light if you're on the street.

How bright your light need to be, even around town, quite simply depends. In New York City, there are streetlights and stoplights everywhere, so you don't need to light up the road and you're not going very fast. In San Diego, there are only streetlights at intersections and the roads are hilly and traffic lights are far apart, so you need to have a light bright enough to light up the roadway travelling at 30+mph. In New York, whatever gets your seen is fine (100 lumens or whatever). In San Diego, you probably want one of the 600 lumen ones. And lumens don't give you a single number that tells you "how good" a light is. Also of concern is beam pattern, how easy the light is to charge, how long the battery lasts, how easy the light is to attach/remove, etc.

I should add that the MiNewt 600 uses a USB rechargeable cell. If and when it dies, it's easily replaceable, and it's a standard size that can be found at most battery stores (18650 cell).

I work this in a few ways. First add, reflective patches in places where it makes your bike more visible. Always carry a battery operated front and rear light, the Planet Bike lights are great for this, easily detachable, last a long time, almost always available. For much of the year, the PB's are all I need. When it starts to get dark early, then you start needing some road bed illumination, so I use a 900 lumen LED light I plug into a cheap Li-Ion battery pack. I go cheap on this as they are too easy to trash or get stolen. So, I try to have two sources if illumination, the PB's for regular riding, and the big gun iight for the dark of winter. Since the run time is relatively short, if the big lamp runs out, I've got the PB's as backup.

The other day I was biking at night and a driver shouted as I passed him, "Turn off your brights!" I had that 1000 linen light and it was pointed downish but on full brightness. So yeah, it is possible to annoy drivers.

The real problem, as others have alluded to, is not a car striking you from the front, but a car running you down from behind. Think about it: a car coming at you at least gives you a chance to avoid it (maybe by diving into a ditch or bushes, but at least it's something); a car coming up on you from behind has you totally at its mercy. If the driver doesn't see you, congratulations, you're a hood ornament. So yeah, get some good bright lights for the front, but don't skimp on rear lights. Something with a mix of solid and flashing lights, plus a reflector vest or clothing, is one of the better safety investments you'll make. And always wear light-colored clothing, obviously. And worrying about blinding a driver with your little battery-powered light is silly. Those new high-intensity discharge headlights are orders of magnitude brighter than anything you're going to mount on a bike, and even regular-old incandescent headlights are typically 100W or so. Just keep it angled down vaguely towards the road surface, like a normal headlight, and they'll be fine.

I definitely suggest checking out at http://s.dealextreme.com/search/ultrafire's ultrafire torches. They are so cheap (delivery might be a little slow) and although you'd need to factor in the cost of the batteries, a charger and a mount, you won't get more lumens for your buck. Most torches have a number of settings, so it's worth getting a very bright one and running it on the low setting - 700 lumens is very bright, but you can set it low and direct it on the ground. The benefit is that you can use it as a normal torch whenever you need it.