Adding fire dynamics to it wouldnt do much at all other than look strange, plus you still would get a dodgy glow to the lantern.

What youve got to remember is that glow is applied in post therefore, its applied by maya after its completed the render and would go ontop of everything.

What you might want to look at doing is set up a light inside the lantern that will cast light and shadows onto the surrounding objects, and then render in layers (with "black holes" to mask objects) with a glow applied in post (say in photoshop) using the layers to set up the glow behind the hat, and the opcaity you can tweek the glow and lighting to get a nice warm feel to light given off by the lantern.

edit -

Come to think of it, I think that the free compositing tutorial on here goes over creating rendering layers and compositing them with real footage of a flame, might be worth a look to get what I mean if your a bit confused.

I forgot to say that your scene's looking great at the moment, a bit of dirt to things via layered shaders should look realyl good once you get everything down.