At McGruffs light the torch by the blacksmith, rest, and head back in. A new chest will be available.

Umm, I got the torch in Things Betwixed... I then went into that first tunnel to the left and lit the torches as well as killing all the enemies. When I came out where the nest is, my torch disappeared. Now I can't even choose the option to light the torch at a bonfire or any scone I've already lit.

To conserve torch time scout and kill mobs around the sconces you want to light up then go back to the nearest avaiable place to light your torch and immediatly run to the sconce to light it. Then aftet lighting it immediatly swap your lit torch out (no need to go to inventory, you can also 2hand ur weapon) Rinse and repeat

Alternately, use cast light if you are caster

Torch sconce puzzles were one of the coolest small changes in ds2