You can get smaller butt connectors. I just installed some bow and stern lights and had a similar problem, but I used small butt connector and was able to get them to shrink to the wire - just barely.
Also, I suggest you stop using flame and switch to a heat gun. I got a $20 heat gun from the painting section at Home Depot. It has two settings, 750 degrees and 1000 degrees. I use the 750. I also used it to remove the name from the stern and some vinyl that was glued to the inside of the hull. Its been very handy.