I would think that the white cover IS needed if you intend to use the unit as it's meant to be, i.e. a candle duplicate effect. The white diffuser keeps all the light inside the frosted glass, so as not to expose the "trick". Without the diffuser, the leds will beam their output straight up and out of the glass holder, making it look more like a sconce than a candle. With mods, this could be kind of cool, but it will ruin the intended effect. Replacing the batteries, circuit or leds will result in a totally different light. Imagine putting an Infinity, or other single led light (or luxeon) on end inside the frosted glass container. An amber luxeon would be really cool. I'm down for one of those mods, glire, when you get to it...
Excellent pics, by the way, and thanks! Your runtimes were with alkalines or nimh?