[...]That aside, if I were suggesting a way to do it, I think I'd start with the idea of saying that it gets dark after two short rests and then gets light again after a long rest.
Straightforward. Easy. Makes logical sense. Doesn't have any complications with multiplayer time passage since all players need to agree to rests. Doesn't involve transitions while exploring.
If short rests became more of a thing, where you could also talk to companions for their dialogue/cutscenes (untying cutscenes from long rests), then the natural loading screens/fadeouts of short rests would work very well with transitions from day->night and any affected NPC positions.
