Lightmap or Vertex Light?

You've done a pretty good job of covering the pros and cons. Vertex lighting is also quicker to set up and doesn't require keeping track of all those extra textures, or keeping them in memory for that matter. My recommendation is to go with vert colors, find a nice balance between quality and efficiency, and try to keep the tesselation down.

Then again, I'll let you know when I make my own Dungeon Master style game... ;)