Okay, im going to state how i would do this
yes, the yellow version looks washed out. this is because it has little contrast. in order to generate contrast there, you need a blue skylight with the orange-yellow sun and some blue-purple relativly dark fog.
the castle version im looking at now (not sure what version that is lol, just the one i have in game here, i suppose latest stable release version
) needs some contrast in that way, and it needs the torches brighter or lit at all, every torch needs a light or else it looks a bit strange.
Id also make the flames a bit slower and make them fade out slower, this can be easily tweaked with the RE particle system
and maybe a bit denser.
The version shire posted is overly grey on the sunlight, even though the blue sunlight gives a good contrast with the yellow torches, the blue is too weak to have any good effect and does not fit the skybox at all. in order to work with shires lighting, imho you need a different skybox.
his torches are nice, but overall too yellow and would need to be a bit more orange to fit closer to the source.
in all versions i think it is odd that light shines through a spotlight onto the portal, and not the portal shining out, in testing for me it looked better when the light was placed dead center very close to the portal surface and the spotlight removed.
[if you want to go for a dark gloomy atmosphere, you would need a different skybox, say penguins/divine and that skybox would give you a purple-black fog and skylight and a small, relativly dim slightly yellow sunlight. i tested this, and it looked ok, but very different and im not sure if that is the direction fatony wants to take it]
quickedit: i did some testing on the stable version to try and un-wash it
what worked best for me is to make the ambient more blue, the skylight a bluish-purple and tune the fog back a bit or make it dark blue, i had 0x3a3540 for /fogcolour