dynamic lights are limited to 8, not 32.
render in shaded mode, rewrite the mapping coordinates of skin1 (the diffuse map), add the skin2 (the shadow map generated in the build process) and that is it. but beware, my experiments were limited to 12 fps in a damn small level.
the alternative is a ffe which does almost the same, though it does not react dynamically on light changes. these ffes slow down even more.
atm, there seems to be no other good and fast way than presented in sphere engine.
[EDIT] i just re-read your post. do you refer to level blocks (the method i described above) or models (then forget what you read).
what about switching some dynamic light off when thy are not visible (or at a certain distance)?