Which DIODE for 12V lighting circuit?
Sounds correct, provided that the two blubs flash at the same time. If they alternate (and you trust the circuit that they always will) you will get by with a lower rated diode, maybe even a 1N4001 would survive. 

So find yourself a bigger diode from your favourite supplier. I would opt for a large margin, maybe a 5A diode. Be aware that diodes for such currents can have a significant voltage drop, which might cause your flasher to flash somewhat dimmer.
You can limit the voltage drop by using a Schottky diode; the SB560 is rated at 5A and drops only 670mV, so even at 3.5A dissipation will be less than 2.5W.