To really sort of drive the point home, I tried to setup a similar scene in the regular engine and take some comparison shots.
Here is regular magic light in the old engine:
And here is the smooth lighting version:
I'm still playing with the values of the second one but I need to wait until I have more of the geometry complete so that I can do proper comparisons. Having a big sand block in the way instead of a little light block skews the whole view.
i didnt fully understand what you where meaning by smooth lighting untill i saw this.... wow its going to make the game so much better ;] i cant wait to have a look at what some places will look like with the difernt lighting. but it also might make building a slight bit harder because there wond be defined blocks itl look so real hehe