Using paddles exclusively and trying to maximize regen actually hurts your range, especially if you stay on the accelerator until the optimal moment to the paddle regen. Because regen isn't 100% efficient, you will actually get more EV range in D letting go of the accelerator as soon as you see slowing or stopped traffic and coasting like the dickens. True hypermilers will even shift to N, coast like crazy, then shift back to D and use the brakes for the final slowdown, or if you time it right, the light turns green, the traffig begins to flow, and you can use all of your momentum to geek going.
As for saving on brake pads, if you used D and brakes exclusively, you are not using friction brakes very much more than the regen paddle. The fact that you have variable regen using the brake pedal is a huge plus as you have better control of the car, and the only time the friction brakes actually kick in is during panic stops and at the very end of a regular stop from 5 mph to 0 mph, about the same time you'd have to tap the brakes anyway while using paddle regen.
I spent two years trying every scenario with my G1, and Sport L, while fun, never got me the best range. It was Normal D with lots of fortuitous coasting, driving like a grandpa,and nice weather that got me my personal best of 52 miles on my morning commute. Then I realized, no matter how much I floor it and waste energy, my MPG still blows away any Prius. So now I drive like Jeff Gordon and take on any and all pony cars and ricer boys at the stop light. So you can keep driving the way you do if it enjiy it, but don't fool yourself that max regen means max efficiency. Max efficiency comes with no regen paddle.
To answer your brake light question, yes on a g2, no on a G1.