Yes, you drop the torch by right-clicking - and it's by design that you can't extinguish them.
It's a "realism" feature that you can feel what you like about, but I personally think it's slightly more annoying than beneficial.
Dungeons are all very dark and I think a little more flexibility is in order for non-mages, as the disadvantage of not being able to fight with sword and shield whilst holding a torch is too big, when you consider that mages have near infinite light sources that are non-intrusive in terms of combat.
Sure, you can always gather light scrolls - but I find them not lasting long enough to want to waste them on a constant basis. Also, savegames don't take the dynamic light sources into consideration - so you lose your light spell upon saving if you reload.
But anyway, a minor point.