Pretty much what it says on the tin, UFO:ET Gold did this and it was really great. You could make it so that aliens and humans were on more... equal terms for night missions, or even make the game harder. Not sure entirely how NPC sight works right now, but if the radius can be adjusted they should probably also gain the same sight bonuses from flares that humans do.
Also, if we could get a variable in the electro-flare to adjust the light radius that would be great, or even some kind of item subsection that controls how much light it gives off. Further switches in this could allow for all kinds of neat devices, such as Night-vision goggles (some kind of undetectable light), glowing dropped items, etc.