The only downside I can think of is that there is no reliable deployment pipeline yet for 1.10. A lot of progress has been made on the new system, deploy-ng, but some parts of it are still untested or unimplemented. But if you need to ship a game tomorrow using pdeploy, 1.9 might be a better choice.
Otherwise, I certainly recommend upgrading to 1.10. If you find any downsides, let me know and we’ll fix those as soon as possible. 
Ah, by default, the loader inserts a ModelNode at the top, which prevents flattening multiple eggs together. You can prevent this by calling clearModelNodes() before your call to flattenStrong().
As for lighting up a part of the model, you could do this by using an mask texture mapped to the model that is white where the lights are and black where they are not, and assign it to the whole model using the TextureStage.MBlend mode. Then, you can modulate the value of that texture at runtime, using TextureStage.setColor. This may or may not produce a convincing effect for your needs. (You could reuse that same mask texture as a glow map for postprocessing glow effects.)
Another approach might be to implement lights using point sprites, by creating a GeomVertexData yourself, where each vertex represents the location of an individual light. This is certainly efficient and can be very convincing if you have a lot of small lights, but it is more complex to implement.