We should absolutely be able to use a torch in our off hand while the main hand holds a weapon... however, I would argue that doing so should provide NO bonus at all, aside from providing you with light if you need it; it's not a light/finesse melee weapon, and it's not a shield, it's just a tool.
By the by, in this game you can hit... I think it's Tab... to force sheath/stow your carried weapons at any time. It's a bit clunky, but for now it works... er, except in the cases where it doesn't and needs further patching, I suppose...
