I don't have a copy of Witchlight.
If it's not too spoilery, could someone explain/hint at Thaco's role in the adventure, if it's significant? Or is he just one of the "extras"?
It's not significant. He's mostly just an extra and if PCs knew everything about him it would spoil almost nothing. But he's at a location where PCs are likely to encounter him. There are a lot of choices a party can make as to where they go and what they do at the carnival, but THAC0 is located somewhere that the PCs are likely to at least briefly encounter him.
THAC0:
1) Sits right outside the door to [an important location] blowing bubbles with his bubble pipe.
2) Does not get along with Burly, another guard.
3) Thaco is the longest-serving Witchlight hand,
4) Nobody knows THAC0's history and scarcely any dare to ask, for he almost never speaks and harbors a malicious streak that is kept in check by Mister Witch.
5) THAC0 paints his face with a grin and puffs on a bubble pipe.
6) THAC0 retired from performing and no longer stages his knife-throwing act due to an unfortunate incident that took place in the Big Top some time ago.
7) THAC0 prefers not to talk and when he must he says as little as possible. He thinks everyone should mind their own business.
8) If anyone tries to touch THAC0's bubble pipe they will lose a finger.
9) THAC0 cannot stand children and think's they're like roaches.
For me, I am an old player who started with OD&D/Basic and played a lot of AD&D 1e. And...I found this amusing. You gotta be able to laugh at yourself. This is not bullying, it's just a silly ribbing inside joke.