Torches should die out after an in-game day (Or two maybe), and need to be re-lit with a flint and steel. This was originally planned to be a feature in Minecraft with the Halloween update, but was never added.

Lanterns will stay lit forever, and be able to be placed on walls and floors, just like torches. They will be crafted with gold ingots, glass, and torches.

There should a kind of decay for torches and lanterns that have been lit for a long time.
People do leave behind a lot of torches, a lot. especially in explored caves, so it would be a surprise for them to see it all lit out when visiting those places again.

Well, yes, that's the point of this. Lanterns are meant to be permanent though.

speaking about realism, what about torches that die out if they are in the rain?

Maybe have a config for this? Many players will find it annoying. Which was the reason it wasn't in the halloween update, too much backlash.

Yes, there will be a config option for it whenever it gets added (As with every main feature in the mod)