There are a couple of ways to approach your situation. First thing is you gotta find out is what really is required. I would go to a DMV and ask them. Here in Michigan we have what is called a green slip that specifies exaclty what is required - this "slip" cuts the crap as far as dealing with some power hungrey Cop who just wants to give you a hard time! If you are lucky your home state will have something simulaur..
That being said, there are a couple of ways to approach your situation. You can install a full fledged lighting system with power being supplied thru by the flywheel - cost are higher but you end up with ACTUAL lights and can ride at night (AWESOME on a MX bike!!). THe other way is the much cheaper way - put the required lights and power it with a small battery. THis will get you thru inspection but has VERY limited functional usage!!
Personally, with as much CHEAP stuff that there is on E-Bay I wouldn't even fiddle with the non-functional!!
I LOVE MY STREET LEGAL KX500!!!
Woodsy