Burning hands would, if it set people on fire, be far more useful than it should be. Already it's a first-level area-of-effect leveled-damage save-for-half spell, the only one in core rules (I think). It'll almost certainly force a concentration check for a caster if done as a readied action, and it can hit invisible creatures. Our fire cleric is still getting good use out of it at fifth level.
As for when it can set things on fire, I'd take that as DM judgment call with player participation, but in general it'd only be highly flammable unattended objects. The scroll in your enemy's hand? Can't set it on fire (she stuffs it in her sleeve just in time or whatever). The evil tome in front of the evil cleric? Sure, light it up.
I'd allow some cool cinematics. If for some reason a character wanted to use burning hands to dramatically light the torches held by a group of people, then sure--go for it.