It's a bit vague how dark darkness is, in previous editions. It often says as dark as a dark night, but the rules also say nightvision lets you see on a dark night, so more than half the races are immune to darkness spells, in one interpretation. That seems a bit silly. But the point stands that darkness isn't impenetrable, you can still see and target someone in darkness, in the RMSS/RMFRP core rules you have a penalty of -25 for standard static maneuvers (and -40 for pitch dark) if you read the maneuver tables, or -100 for complete blindness if you read the description of Spatial Location Awareness (or Blind Fighting in the MAC) which doesn't quite match up. Spell Law says attacks against invisible targets are -50, so that's a different number too, and "characters who are blind or operating in magical darkness operate with a modification of -100" which notably doesn't make any distinction between "darkest night" darkness spells and utterdark. Spell Law also says both that nightvision allows you to see just fine under the stars "or even a tiny point source of light", and darkness spells create the same darkness as "the darkest night", which in my mind is a bit contradictory. So there is a little room for interpretation how it should actually work and I don't know that these rules were compared with each other when they were written.
In RMU as currently written, non-magical light sources produce no light when they are within magical darkness. Since it's not pitch darkness, I imagine you could faintly make out their light, with the brightness of a very dim star -- enough to be faintly seem, not enough to illuminate anything else. So, no, a torch or lantern in such an area would not produce light normally. Utterdark makes even light spells completely imperceptible (but note, it doesn't dispel them, so the light will become visible again immediately if the utterdark is removed or reaches the end of its duration).
Certainly the combination of darkvision and darkness is advantageous. You could do the same with fogvision and fog, that isn't quite as high a penalty (although up to -75 for extreme fog in RMU) but it defeats Darkvision so that's a useful trick. You're still out of luck with creatures that sense life, like undead. There is also a blindfighting skill which mitigates these penalties, and nightvision aside from being a common racial talent is also a frequent low-level spell. So, that advantage is not absolute, some foes will be able to handle it. Also, darkvision tends to have fairly short range. And unless many party members have darkvision, you might be limited to using it when you are on your own.
Like any good trick, it ought to work sometimes, especially when you are dealing with forces you outclass. But it might not be reliable.
I do recall one case where my nightblade PC used Darkness on a group of enemy nightblades. One of them was skilled enough to operate and darkness and that would have still been a fight. (Except I rolled a natural 100 on the first critical, so, not really.) The rest were low ranked and we did not bother playing out that part of the combat. Seemed like a good way to limit it but acknowledge the utility. Also, I was separated from the party so not dragging out the encounter probably made sense on those grounds too.
