1) You need Dragon Armor from the Stout Mines. Do the Stout Mines first, get the Dragon Armor, then have your lead character(s) equip it. You should be able to push past the Bronze Firebeast and click the switch on the wall behind it to turn it off.
2) The gems are the latest design in interior subterranean indirect illumination. (In other words, they're ornamental only.)
-Sazerac