Looks like a good kit, never seen one like this before. If you're building a wall, first you need to decide what the surface pattern is going to be ie: is it going to be red brick, concrete or something more complex like a warehouse style corrugated steel wall with pipes and stuff? Because that will help you decide what the best material is. The base of the kit appears to be some kind of industrial / factory type thing. A good flat base/wall which you can build upon would be styrene plastic, as it's easy to cut and shape and is fairly sturdy compared to polystyrene and card, the issue is then what do you stick on to the styrene wall? You could use photo etched brick paper to make it easy but, you won't get the depth or any 3D effect, you could literally get a high-quality printout of a factory wall and stick it on the styrene or you could build up layers by creating beams out of plastic sprues (model kit sprues) and get already fabricated corrugated steel panels for scale models, although be careful about the scale. Plastic sprue can be an extremely useful material for things like beams, pipes and pillars which is why a lot of us tend to keep a fair amount rather than throw them away. One thing to be mindful of is if it is in a childs bedroom, how many breakable bits do you really want on it? I'm just thinking back to the fate of most of my model kits when I was younger ! for the light I would try and find a super size red LED, to make it flash you probably just need to make a simple circuit with the right resistor in or buy a ready made control circuit from somewhere like Maplins and have it powered by a CR232 button battery . Anyway that my two cents.
