Rewrote my dynamic lighting system (not the mostly model based 2D lighting from my side-scroller, but the one I've posted in this thread a while back) that now supports multiple lights and IMO looks much nicer. There is still no additional rendering involved despite the camera view and no postprocessing, it's an object shader (PS 3.0) applied to WED level geometry. It continues to use line segments (simply defined by two points) to perform the shadow calculations, so the shadow for a cylindrical column can be realized with one line (that is updated per frame), a rectangular pillar (see screenshot) with two line segments (thanks to Hummel's Twilight Box for the idea of using two lines diagonally).
The ground has a simple dynamic texture shadow system that illuminates the tiles in respect to a heightmap and the light(s) and draws basic shadows (don't know if you can call that bumpmapping or something like that, I don't have experience with that stuff). I can upload a demo/ video if you want.