Normal Mapping (again)

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Just starting to get to grips with a nice art pipeline for normal maps in Blitz, and now I have hit a prob.
I have multitexturing working with a normal map, a base texture and a decal graffitti style texture, and am looking at taking this technique into a full walk around level.

Now, the few examples I have seen of Normal Mapping all seem to use a light that rotates around using sin/cos routines....obviously you wouldn`t have this in a game.

I do notice however that the rgb value for EntityColor is also derived from this calculation, but I don`t see how it fits together.

Can`t I just use a normal CreateLight() and walk around having it light my level with the Normal Maps?
Do I need to do some additional calculations each loop to update the normals on the surfaces with them applied?

Cheers