IMHO, what you are trying to do is pretty easy. Don't mess with the light head. A leaking canister is better than a leaking light head. For one you will know about a leaking canister after the first dive and you can do a dry run sans battery. A leaking light head my not show it's self until the ballast is damaged. Also, it's likely that there's much less room to work in the head.
So back to the canister side. Cut the shrink wrap off. It's not necessary and in fact is likely to be more of a spot for corrosion than anything else. It looks like it's there to act as a strain relief and maybe to cover up an ugly brass gland.
It looks like you might have to un-solder the wires off the block. Then loosen the gland as described above and pull some slack through. A little spit or rubbing alcohol works great as a lube. I have never tried silicon, but my gut feeling is not to use it.
Once you get it where you want it, mark the insulation near the inside surface of the lid. Pull it through a little more so you can remove the insulation from the mark forward. You will likely have three wires. One of them isn't used. It's just easier to seal a round cord (three wires) than it is to seal a flat cord (two wires). Cut the un-used wire near the cut insulation. Cut the other two wires to the proper length and re-solder them in the correct location. Re-tighten the gland and you should be good to go.
If you really care about the shrink wrap then you can put another piece on but you will have to pull the cord completely out of the lid and thread a new piece on. It's not really necessary but it's easy enough to do if you want.
Hunter