I personally think that the torches idea is great, as it creates more of a "survival" feel to the game. Notch has previously expressed that he likes the idea of making the lantern code into the torch code, so as to make it easier for people already playing, but I think that it will just make it more fun and challenging to just create a new code for lanterns and make us struggle(or make new files).
Another concern was the fact that people want the look of torches in their caves, as it does look cooler. Of course, we don't yet know how Notch is going to design the lanterns, but people still don't like it. I say, just create a new skin pack if it's bothering you. Just make lanterns into a different kind of torch, like maybe a red one or something to know it's infinite. It may look a little awkward, depending on the placement of the fire, but it would at least be better for some people I'm sure.
And the rest of the update looks great. Keep up the good work Notch!