voltage of lighting system I had a B&amp;M ? brand (german make) rear bike 'standlight', removed the capacitor as I found it annoying when switching to a battery. Used a 6x cell AA 1,2v pack for awhile, with no issue. Upgraded all the wiring to silicon, and put in a 0,8AHr Yuasa gel lead acid. 

For some reason I choose a 12v lead acid instead of a 6v.  ?

The front headlight, which was a xenon lamp design with a voltage regulator circuit that I replaced with a LED inside the reflector, same headlamp control circuit, seems to like it. Good light.

However, the rear red 'standlight' got dimmer, and dimmer. And now barely lights up at all. I think it was not designed to operate with such a continuous peak voltage around 12v and wondered what you thought.
You most probably damaged the rear light and are risking damage the voltage regulator on the front, too, since the huge majority of generator hubs provides 6 Volts.

If the regulator on the front is sophisticated enough, perhaps it is using just enough current and voltage to feed the light, but I think most circuits use a Zener diode, that actually make the excess voltage to "leak". This is not big issue with generators, whose alternating current waveforms just go above 6V during very short fractions of a wave, but with a battery, it's possible that it is working a bit like "short circuited". If the front light is over-heating, that most probably might be happening.

As for the back light, the light-emitting elements of leds are very sensitive to higher-than-normal voltages, and tend to "burn" due to overheating and chemical/physical damage.

I advise you to check the current voltage of your system, and switch back to a lower voltage if that is the case.

Hope that helps!