The Character may hold a torch.
Either you enable “Cast Shadows” and get ugly dynamic Shadows (always sharp, no matter the distance)
or you disable “Cast Shadows” and simply go without shadows.
It would be great to have Capsule Shadows a per Light setting.
(or soft shadows for Skeletal Meshes in General :P)
Edit: Capsule Shadows in Indirect Lighting use the Lighting Cache to choose the Direction they are casted, a dynamic light does not change the direction of the Soft shadows.
You should be able to do this already by adjusting the source radius of the movable light to soften the shadow. You must also enable Capsule Direct Shadowing on the Skeletal Mesh.
Does not work. The Light is set to moveable, Source Radius to 50, and the Skeletal Mesh set to cast Direct Capsule Soft Shadows
However, Enabling Direct Capsule Shadows means that ALL lights cast a soft shadow. Most of the time is not wanted (only for fire for example)
A Sun should cast a “sharp” shadow, unless the sun is obscured by clouds.
I’m not at my computer to test, but as I said, the source radius of each light controls the softness (also mentioned in the tooltip for capsule direct shadows). There is a default value used for source radius under the hood but some value greater than 0 and less than 20 (i believe) should sharpen the shadow. Lights that you don’t want to affect softness just use a lower value than 20. All lights in the real world have a softness to the shadows objects cast based on the angle of the light and the distance the shadow is being cast.