Right now, the torch timeout pretty much effects all the Lanterne modes in the same manner; if the light stays on continuously for the specified amount of time, it will be turned off. (And the indicator light will be set to flashing, if that preference is set.) At least, that's how it has been working for me. (For example, set the timeout to 1 minute, set up the light sensor, take the N900 into a dark room, and wait; the light should turn off after a minute. If this isn't working, please let me know!) It's true, though, that the UI does not make this obvious. I need to put some more work into it.