I would suspect paper and torch to make a lantern. Or Iron and a torch. Oh and he is planning to change all existing torches into lanterns, and then the "new" torches will be added to the game. Thus our hard work is not all shot to hell right off the bat. Stock up people, we don't know how gay it is going to be to make lanterns. Oh and he is confirming changing the torch recipe so the current torch ID will get a new recipe and a new model/texture (the lantern). Then the new torches will get their own ID and behave like they are supposed to. This is to prevent people with under ground lairs from being totally screwed over. With this in mind I don't mind the change so much. Also I have a sudden urge to smelt a crap ton of glass. Hahaha!
That's nice and all, but the balancing comes up when you're starting a new game. And that isn't exactly an insignificant issue
And not just for new players. Considering the game is still being worked on it's as the Minecraft homepage says: don't get too attached to your saves just yet.
How much time are we going to spend re-lighting torches? How long are we even going to be using torches? Are torches going to be at all useful, or is it just going to waste an item space? These are all questions that need an answer. I suppose we'll see what those answers are once the update rolls in.