Regular silicon will be just fine. Just let it fully cure. I've used it with no ill effects. Plus if you get the kind that is has the germicide in it, it will help prevent bacteria and what not growing on it.

As for flexwatt, its fine to use in the cage, you should be able to get a good gradient with it. If you don't with one piece, then put two pieces in, and have them regulated by two different t-stats. One for warm and one for cool. If you do use flexwatt, just make sure that its 100% sealed from moisture. I seal the connections with silicone, then cover the entire piece with acrylic/plexiglass/glass and seal the edges with silicone so that if water/urates get on it, you don't risk electrocution.