I have read the thread and the replies and it seems that the census is to use Heat shrink over the lead.
I believe that over time the heat shrink will crack, as a electrician I bought a roll of Rubber splicing tape about $6.50 Canadian and a roll of 1/4 inch pencil lead for $10.00.
I was able to wrap the entire length of pencil lead( one pound) with rubber splicing tape. Once the tape is wrapped around the lead wire ,which took me about 1/2 hour to wrap and patience .
Once you wrap the Rubber splicing tape around the lead wire overlapping the layers by1/8 to 1/4 inch it will bond to itself and become one piece of rubber, which is pliable and can be shaped and bent many times with out the worry of it cracking or the worry of the lead touching your skin if you choose.
I have tried the rubber wrapped pencil lead and it works great, the rubber actually helps keep a better grip when wrapped around your penis. I am still experimenting on different wraps to use with it as well as what tension I am wrapping the lead at.
Has anyone else tried this?