When equipped, the candle protrudes through the basket when using the shortcut from the garden to Silas, unlike the lamp which is removed so that doesn't happen.
You can make the candle disappear. Go to the top of the garden basket shortcut. Equip a candle. Enter the basket. Once you start moving down, unequip the candle (I'm using a 360 pad in case it makes a difference) by pressing d-pad down. While still moving in the basket, push d-pad up to re-equip the candle. It won't show up however. Now, when you exit the basket at the bottom, Tilo will be holding his hand up as if he's holding the candle, but the candle isn't there. Oddly, if you try this while going up, it seems to resolve itself after you get out at the top after a few seconds.
When you get the stack skill that lets you hold up to 10 candles etc, go to the catacombs. Use up a candle or two, but make sure you have more than five left. Now try and take an extra candle from one of the coffins and it won't let you. Go back to somewhere like the jailers office though where there is a stack of infinite candles, and it will let you resupply back up to to ten. The single candle near the start of the game on the bench isn't affected though, so I'm not sure if it's just a problem with the catacomb candles or not.
In the elevator, when going up, the physics push the flame down so it looks like the candle isn't lit.
Talking of the elevator, I had Tilo's minstral hood equipped coming back from the catacombs, and the hood slightly "vibrated", clipping in and out of his head. His hoods bell can also look like it's being affected more than it should be (physics wise) in the elevator.