This plugin is not my original idea and already created by Hariedo with the Handy Torch plugin. http://dev.bukkit.org/server-mods/handytorch/ But it seems like the author has given up on it, I would love to see this again. Just hold a torch, glowstone, fire, lava and light will emite from your hand iluminating the area without placement of any block. Also what Handy Torch did not include are permissions, so that would also be a plus. Thanks to whom ever can take up this project.
This might interest you: http://dev.bukkit.org/server-mods/torchlightplus/ Light calculation is now handled client-side, so the plugin is currently borked. I'll be patching it up over the next few days - keep an eye out.
Answer to all your problems: http://www.minecraftforum.net/topic/184426-123-dynamic-lights/ It's a client side mod, but for the sake of hand-held light sources, it's your only option.
