They don't seem to be shifting in response to the torches here, in fact the torches don't even appear to be casting light:

Sweet merciful lord is this ridiculous back and forth still going on?!

Pure stubbornness

Mate are you having a laugh firstly 0:39 shows the torch casting a light, secondly look at how the shadows shift when characters and monsters are moving at this point you're reaching, Shenmue was a good looking game for it's time but the are many factors you didn't realize when you declared that notion.

On both ends :P

Not really interested in Monster Hunter, but I can see the appeal. I tried MH4U at Nintendo's Pax Booth in 2016, but didn't like it. It's nice to know that we're getting custom Switches, though.

They're not though, at 0:53 on that video the torches are being waved back and forth as the players swing them, but their shadows do not sway back and forth in response, nor is light being cast on the Great Jaggi. Meanwhile, at 8:44 in DF's video above, walking passed a light source clearly causes Ryo's shadow to shift in response.

Then of course there's the simple fact that MH 3DS looks, well, like this:

No game releasing in the modern era should look this terrible.

At 0:53 the player is standing out in the open in bright light with the shadow is shifting and the light is being cast on the Jaggi as seen in 1:21. As for your screen MH3DS doesn't look like that as shown in the images and gifs I posted earliar, if you take screen shots of any game running at one resolution with the output screen at a different one ofcourse you'd get bad screens. How the game really looks on 3DS is like this:

This is fine considering it's a portable.

There isn't any torchlight being cast on Jaggi 1:21, and two players with torches are standing on the camera side of Jaggi yet the shadow isn't being cast away from their torches as it should, it remains unaffected.

Posting native 240p screens here on a computer doesn't necessarily echo what it looks like on 3DS, as due to differences in pixel density a 400x240 image here actually looks better than the game does on the 3DS.

For example, here's a 240p image of MH4:

On my screen, this appears smaller and therefore better than on my actual 3DS. This is closer to the size and therefore quality of the actual game:

Light is being cast on the Jaggi in the same way it was on the player at 0:21, they're fighting it during day light where the effect is reduced. As for MH4:

Looks fine as well considering this is a game that released 4 years ago on a portable, 3 if we go by 4U.