Also, isn't it kind of time consuming to change the vertex colors of all the vertex's for all objects, rather than just do a render of a light-image with a particular blend mode or stencilling??
Not quite. Each frame, Blitzmax is creating brand new polygons each and every frame, instead of re-using existing meshes with lighting.
Also, adding a single light adds a performance hit. Lights are never free anyway...
That said, I would be willing to use OpenGL lights if someone could teach me how it's achieved... :)