An update on this issue, I did some testing and here’s what I found out:
Lit flashlight in inventory: Can read
Lit flashlight wielded: Can read
Lit flashlight on the floor: Can read
Lit torch in inventory: It’s too dark to read!
Lit torch wielded: It’s too dark to read!
Lit torch on the floor: It’s too dark to read!
Lit candle in inventory: It’s too dark to read!
Lit candle wielded: It’s too dark to read!
Lit candle on the floor: It’s too dark to read!
What bugs me about this, I’m often stuck indoors because of thunderstorms or rain and I’m rapidly running out of batteries because there’s not much else to do than read in the dark. Edit: Well, there’s raincoats in the game, so I can put one on and do some adventuring.