A friend of mine has done this -- he uses a bit of 30mm I/D plastic piping, with a LED mounted behind a pinhole, recessed into a wine-bottle cork which plugs into the side. The LED reflects off a microscope slide at 45 degrees across the tube. He mucked about to find the optimum sizes for the eye-end and "big end" holes. It looks nearly as tacky as the made_of_scrap Dob to which it is attached, but both perform superbly! The sight is used with both eyes open and natural superimposition "projects" the dot onto the sky.
Clear Skies, Steve <sft@aegis1.demon.co.uk>