The topic of using a torch as a shield was raised on one forum. My answer was pretty simple, and based on my unified approach to attack and defense bonuses. I figured I'd reproduce it here. I'd allow a torch to be used for straight-up parries. Wielding a torch defensively in one hand is just like having a shield, although it would offer no protection against missiles.
An attacker with a weapon knocks the torch out of the torch-bearer's hand on a 5+; if the attacker's weapon is edged, the torch is cut in half instead.
A natural attack (punch, kick, claw strike) against a torch-wielder runs a risk of getting burned (5+ on 1d6, causes 1 point of damage.) Loose clothing and some other materials on an attacker's arm catch fire on a 5+.
Sweeping the torch in an arc around you can be used in place of an attack to provoke morale checks in animals.