Almost forgot.
No it doesn't damage it, although there's some sort of material inbetween the two pieces that gets pulled apart a bit. It's not exactly an o-ring, and it's not exactly rubber either. It's kind of like a sticky rubbery foam gasket.
The light goes back together just fine, though, and I suppose the worst that could happen if you rip apart the foam stuff too much is that you could make another gasket with a bead of silicone. Auto parts stores sell stuff specifically for this called gasket maker. It really wasn't necessary in my case, though, and I've tested the waterproofing since then, and no leaks at 2 feet. The battery case is another subject, though.