The idea of chosing to swap out one hand from shield/weapon to light source is very appealing to me. It should be taken even further, where it can attract or repel mobs. Also, we should be able to throw torches or stick them in the ground. Imagine a fight where there's a large group of fire/light phobic mobs surrounding the party and the crowd control character is augmenting normal CC with strategic torch placement and chasing after the mobs that break through with some Indiana Jones torch waving.
Torches should be a one-handed melee / throwing weapon. Don't make them necessary every time it's dark, however--save it for particularly dark places.