The way I envision it working is like this: structures made of wood or thatch can be set on fire in two ways: close proximity to a fire which could be a campfire or a structure / plant that is burning, or by being attacked with fire such as with a torch or by the dodo rex or dragon. When an object is on fire it would lose health and could not be repaired until the fire was put out (either by rain or by using water carrying devices, or possibly a fire extinguisher engram). When an object is burning, objects around it that are flammable would have a certain amount of time before they too would catch on fire. Different structures take different amounts of time, and distance from the fire would also factor in. This would include trees and bushes so it would be possible that a careless player could start a forest fire by forgetting to put out his or her campfire. It wouldn't consume the whole island either because it's divided up by rivers. Plus, after a tree burns it could turn into a "scorched tree" that could be harvested with a tool for wood and charcoal instead of wood and thatch.
Some dinos would need to be programmed to fear fire so they don't just sit in the middle of a forest-turned-inferno, but larger creatures like the bronto, Trex, Paracer, Giga etc. could walk through relatively unharmed. This could also be an interesting mechanic to make torches more useful: while they would cause predators to investigate at night, torches could be used to effectively keep smaller aggressive predators like the wolf and sabertooth at bay. They would flee for a few seconds after being struck with the torch, giving you time to move or focus on attacking other hostiles in the area.
Also, maybe certain armors could be flammable like cloth and fur. Unless a player can put themselves out, they start taking damage and their armor looses durability.
In short, I just wanna watch the Ark burn.
