Well, I can only speak from the experiences i have had so far with the UT3 engine and say that in BiA Hells Autobahn (UT3) which is out for quiet a while, light and night are pretty well done already. It is by no means a very good comparison but it shows what can and has been done already.
http://www.games32.com/web4/games_catalog/games/Brothers-In-Arms-Hells-Highway-PC/images/43628.jpg
http://www.games32.com/web4/games_catalog/games/Brothers-In-Arms-Hells-Highway-PC/images/43626.jpg
Those are screenshots from a night "level" or mission which i found had a very nice athmosphere. There were unfortunately no flares, but the burning vehicle wrecks kept illuminating the area and created an interesting surrounding.
I think the frontline auto flare idea is not bad although, I would personally prefere to have a flare gun attached to key figures/classes in game.
It would be way more brutal if the Squad Leader could be "asleep"/not paying proper attention and therewith not launch a flare while the enemy approaches and in his turn suprises the careless foes. Also, alarm posts on defence could be equipped with flares guns, or specific frontline foxholes so that anyone being in there would be able to alert his comerades.
Further on how about, different colours of flares?
One could call for retreat, attack, theoretically even rescue oneself from an impeding friendly fire attack by air or land.