Well if you're using Blitz3d then you're pretty much stuck with per-vertex lighting unless you want a purely static lighting solution ( lightmaps ) which you clearly don't.
When Halo refers to "dynamic volumetric lights" I'm not sure if he's talking about the lighting of meshes or just the appearance of beams of light through the air.
As JohnJ says, you're doing pretty much all you can do because per-vertex lighting is all Blitz3D properly supports natively. There are some libraries which add per-pixel lighting, I think, but they all seem to have compatibility issues or bugs to a lesser or greater extent. With B3D's inbuilt dynamic lighting system, the only way to increase lighting quality is to increase vertex density, and if you're going to increase vertex density it indeed makes sense to reduce it elsewhere in the scene with some kind of LOD system.
When Halo refers to "dynamic volumetric lights" I'm not sure if he's talking about the lighting of meshes or just the appearance of beams of light through the air.
As JohnJ says, you're doing pretty much all you can do because per-vertex lighting is all Blitz3D properly supports natively. There are some libraries which add per-pixel lighting, I think, but they all seem to have compatibility issues or bugs to a lesser or greater extent. With B3D's inbuilt dynamic lighting system, the only way to increase lighting quality is to increase vertex density, and if you're going to increase vertex density it indeed makes sense to reduce it elsewhere in the scene with some kind of LOD system.