I think the hand doesn't look ugly. It's not a perfect hand I must admit, but I've seen so much worse in other games or mods...
The only thing I noticed that "turns me a bit off" is that when you lean, the hand and the lantern both follow that motion. In reality the hand would stay still, or mostly still. So you'd probably get the hand and lantern out of sight while leaning.
But also like nofsky said, if the hand would lean with your body (for some reason...) then the lantern would stay vertical and so would the hand move to accomodate for that.
And this leads me to imagine if you look at the ceiling while holding the lantern. I foresee the lantern going horizontal in that situation.
But I quicly excuse this for indie devs... I don't excuse it for professional devs, tho, and all the "great" FP games that have been coming out in the latest 2000s still have this stupid mistake all over. Which makes me find them even more disgusting...