I ran across this great tutorial and couldn't help but try it out: Dynamic Lighting.
First results (definitely need tweaking, stones looks like they are covered with moss (which is not horrible, but not intended.)). The 'light source' is in the lantern.
I bought a copy of DLight Sprite (recommended in the tutorial) and it worked really well, since it was one-click to normal maps and I did not have to draw shadow maps.
I used the recommended shader (Normal Map Extended, which worked well.
There is a lot to tweak in the effect and I think I will need to do it live, so I can play with it quickly (via sliders in game).
The lamp just has a glow with a sine for changing the angle and the origin point move to the top of the sprite and a particle attached insider it.
The tree branches are not lit. so they seem really bright, so thinking about what to do there.
The normal maps are baked in terms of orientation, so when I had the stones rotate the lighting was very incorrect as the normal maps rotated. I could leave them non-rotating or could look at the effect / shader and see if there is way to change it based on the rotation / orientation of the normal map vs the 'light'. That would be the better 'universal' fix, a big hack which may show roughly correct results would be to also rotate the location of the light as the stones / normal maps spin, but would have to be done separately for each stone, which is a pain (right now, the stone and player normal maps are all in one family with a common normal map extended effect and a common light position.)
The effect has two more lights to play with, so I may add a little blue will-o-wisp (like something from Totoro, like soot sprites floating around) and also a stone lantern near the ground with a red colored fire.