I have experienced the same thing 3 times now. I can't find any pattern to it, no set amount of time, or number of server hops.

I ran across this same issue, and it does seem to somehow be related to the character/server instance. I picked up a gas lamp and small gas canister last night, and it worked fine. However, today when I logged into a different server, I get the same results - it changes to a lit/fullbright texture, but casts no light. I have tried detaching and reattaching it, a well as dropping it and picking it back up, but nothing helps.