Instructions
Start the "Haunted House" level and then walk to the left until you get to the house. You'll notice a bat flapping around holding a key. Chase the bat and touch it with your character to get the key.
Walk to the left side of the house and click on the cellar entrance to gain access. Walk down the steps, and take note of the barrel of kerosene that is standing underneath the stairs. The barrel is clearly marked and very important later in the game for getting the lantern lit.
Walk to the right and go up the stairs. Continue playing until you have collected all the required items, including the lantern. You'll find the lantern on the upper floor room that has the fireplace. To get the lantern, set the time on both clocks inside the room to midnight and it will appear in the fireplace.
Go to the room that is on the right of the doorway where you came up from the basement, and speak to the ghostly cat. You will be told to light the lantern.
Walk left and go down the steps to return to the basement. Walk all the way to the left until you reach the barrel of kerosene under the stairs you saw when you first entered. Left click on the barrel and your lantern will be lit.