The interesting history of the modern flashlight is outlined here
here.
I think, in terms of Indy, it's a question of what's appropriate to the environment. If you're on an expedition carrying limited supplies, I think you'd want to conserve the batteries in your flashlight when other alternative light sources (
eg, torches) exist. From a practical standpoint, torches may also have an advantage in some situations where you want to scare away animals, insects or reptiles or burn through cobwebs etc (
Raiders, Temple). Conversely, in the cemetary scenes of Crystal Skull, Indy is intially in a windy location and then an enclosed space - both unsuitable for naked flames and naturally favouring a flashlight. Towards the end of the film he does use a traditional torch, but only after a drenching in the river - which may have rendered his battery torch unusable.
However, the most important aspect of this discussion is how each looks on-screen - in which case, I believe torch beats flashlight every time
Indy's Brother - you make an interesting point about the flashlight as an indicator of the "modernisation" of Indy. While in reality it's anachronistic (
having been invented nearly 75 years earlier), I'm certain it was a deliberate attempt to update his equipment to reflect the technological advances of the era and root him in the 1950s.