Lens flares are mainly for the visual effect. You'll want to look for light properties and its color for the right settings. I'll get a picture up:
{EDIT}
http://img221.imageshack.us/img221/7...tedareahs9.jpg
Take a peak at the highlighted area... you just choose the values there for it's direction.
And down lower;
http://img221.imageshack.us/img221/5...sityaresg3.jpg
Make sure that the little black box matches the color you want to be casted on your level. If you don't want to enter values, just hit the box and use the color chooser.
As for settings, make sure it applys to what you want (ie, Affects Exteriors)