Yes, 1/8" or just a tad smaller is fine.  We're not building America's Cup boats here.  You'll appreciate the extra strength in the long run.  Also, I covered my blades with a few coats of graphite epoxy which thickens it up a bit.  Some people even glass theirs.

   Can you paint over the black grpahite epxoy cotaing or fo you leave it as is?

Actually, I would recommend a bit thicker than 1/8".  The template that came with my Goat Island Skiff plans actually has a 1/4" thick trailing edge.  As CS says, the trailing edge needs to have some strength.  That is the part of the board that will absorb the loads created by an accidental grounding.  

The more important thing is to NOT round over the trailing edge.  It needs to be cut flat/perpendicular (square) to the chord line of the C/B.  Rounding over will create significant drag.

If you coat with the epoxy/graphite slurry, no need to paint.  The GIS plans called for the boards to be glassed.  My plan is to paint them with the same paint that I will use on the bottom (Wetlander).  

No, you can't paint over epoxy graphite.  Evidently, the paint doesn't stick.  That's okay, I like the matte black color.