The extraordinary ability low-light vision is a mess...
The elf racial trait low-light vision says
An elf can see twice as far as a human in starlight, moonlight, torchlight, and similar conditions of poor illumination. (PH 16)
The Player's Handbook on Vision and Light adds that one should
Double the effective radius of bright light and of shadowy illumination for such characters [that possess low-light vision]. (165)
The Monster Manual provides a similar description of low-light vision that's slightly more explicit:
A creature with low-light vision can see twice as far as a human in starlight, moonlight, torchlight, and similar conditions of shadowy illumination. (311)
And the Dungeon Master's Guide provides a description of low-light vision:
Characters with low-light vision have eyes that are so sensitive to light that they can see twice as far as normal in dim light. [...] Characters with low-light vision can see outdoors on a moonlit night as well as they can during the day.
Finally, the Rules Compendium provides another description of low-light vision:
Creatures that have low-light vision can see twice as far as normal in dim light. ... Those that have low-light vision can see outdoors on a moonlit night as well as a human can during the day. (115)
In other words: Yuck, or Ask the DM.
...But you can probably safely just take the best parts
The light levels poor and dim aren't listed Table 9–7: Light Sources and Illumination (PH 165), but shadowy totally is. And while torchlight can be either shadowy or bright illumination according to the same table, moonlight and starlight aren't even on the table.
So from the Player's Handbook section on Vision and Light take double the effective radius of bright light and shadowy illumination, from the Monster Manual description take starlight, and from the Dungeon Master's Guide description take see outdoors on a moonlit night as well as they can during the day. Put them in a Word Blender. Pour out...
Low-light Vision (Ex): A creature with low-light vision can see twice as far in bright and shadowy illumination. It can see outdoors on a starlit or moonlit night as well as a human can during the day.
When the torches go out (or whenever the DM says the night's overcast), such a creature is still blind, which is the rather severe downside of low-light vision. (I'm not sure discussing low-light vision with regards to flaws is entirely fair, given that one can always mitigate one's flaws simply by playing differently.)
"But how far can a human see in moonlight?"
Effectively, creatures can see as far as one of us humans actually can... that is, until the creature needs to use the skill Spot to determine the location of enemies.
The skill Spot isn't used to determine the literal distance a creature can see but how far away a creature can detect enemies. Each terrain has a Stealth and Detection entry that's used when determining the distance at which encounters effectively begin. For example, Stealth and Detection in a Forest says
In a sparse forest, the maximum distance at which a Spot check for detecting the nearby presence of others can succeed is 3d6×10 feet. In a medium forest, this distance is 2d8×10 feet, and in a dense forest it is 2d6×10 feet. (DMG 87)
So the DM determines the distance randomly. Then according to the skill Spot
The Dungeon Master may call for Spot checks to determine the distance at which an encounter begins. A penalty applies on such checks, depending on the distance between the two individuals or groups [a −1 penalty per 10 ft.], and an additional penalty may apply if the character making the Spot check is distracted (not concentrating on being observant) [a −5 penalty]. (83)
But the DM needn't call for such Spot skill checks and just declare the encounter begins. Further, if one or more creatures are in shadowy illumination those creature have concealment and can use that to make Hide skill checks, probably substantially reducing the chances they'll be noticed by an unobservant sentry making a Spot skill check. If one or more creature is in darkness then I hope you like rules.
D&D 3.5 never says exactly how far folks can see. Instead, the game explains how far away folks can see the next pile of XP.
As the DM, you can introduce whatever you want, including darkness that Darkvision doesn't see through. However, if you're looking for options that already exist within the rules, there are plenty.
- The Darkness spell creates magical darkness that normal Darkvision does not see through.
- The Fog Cloud spell creates magical fog that heavily obscures an area.
- There are a bunch more "fog" or "cloud" type spells, but they have additional effects that you may not want (like a bunch of damage).
That said, all of those spells affect a fairly small area and last a fairly short time. You want to fill a dungeon and have it last an adventure? You want one of the most underused spells in the book. Guards and Wards. It does a bunch of stuff, but the one you care about is:
Fog
fills
all
the
warded
corridors,
making
them
heavily
obscured.
It lasts for 24 hours, and can be made permanent with some work. It covers a huge area. It's really cool. It's almost as if it was made for this exact situation. (Because it was.)
Best Answer
If you remove Darkvision from PCs nothing much happens. If you remove it from monsters some encounter design becomes painful.
Well I haven't outright removed darkvision in any of my games it has bothered me for awhile. In 5e six out of the nine races have darkvision which, for my games, is ludicrously too common. For a bit over a year I've experimented with ways of limiting darkvision's effectiveness through area design. Some examples of things I've tried:
The end result has been that the players don't trust darkvision and use it only as a last resort. They carry lamps, the wizard casts light, they actually care if an area is lit or not, and then carry on as usual. They do have more issues scouting as a lamp gives away your position pretty quickly, but we consider this a feature not a bug.
For my part I get to describe moody forests and dark tombs without bothering about what the elf/dwarf/gnome/half-orc/tiefling/half-elf sees different. I see no reason why removing darkvision from PC races would be much different and likely will do so in the next iteration of my game.
An addendum: I won't be removing it from most monsters. I enjoy designing dungeons that are reasonably functional ecosystems and figuring out how all the monsters find their way around in the black is a headache I see no value in. This isn't a problem for me because, in for my game, I'm comfortable with monsters having access to abilities that the PCs don't. Monsters are... monsters, they're supposed to be different and for most being able to, "see", in utter-darkness is suitably terrifying.