See screenshot. This happens in 1.5.1 multiplayer with no mods installed at all. The flame particles are rendered one block south of where they should be, consistently.
Before you say, please search for duplicates, I did. There is such a huge number of duplicate and unresolved reports about torches and particles that it was impossible to read them all.
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As requested.
Your Java version is out of date. Please update your Java to the latest version: http://www.java.com/en/download/. Keep in mind that when using a 32-bit browser on a 64-bit OS the automatic version detection will only show the 32-bit version of Java, the 64-bit version needs to be downloaded manually: http://www.java.com/en/download/manual.jsp.
Please report if the issue persists with the latest Java version.
1.7.0_u10 is not "out of date".
Current version 1.70_u21, your's 11 versions out of date.
Are you saying that Minecraft only supports the most recent version of Java?
I'm saying to please report if the issue persists with the latest Java version.
As requested. The issue persists in Java 1.7.0_u21. Surprisingly.
Can only reproduce by going far away from spawn like in MC-3718.
That would correlate, the multiplayer world concerned has coordinates that far out.
Can you please take a screenshot with the debug screen enabled (F3) to see at which coordinates it happens?
Please force a crash by pressing F3 + C for 10 seconds while ingame and attach the crash report here.