I think it would be best implemented if you could equip flammable arrows, and you had to be near a fire which automatically lights your arrow when you draw it, or you draw it, activate the fire (he then dips the arrow into the fire) and it becomes fiery!
I would've thought fire arrows would hurt less on impact but obviously burn people/stuff to cindery goodness, they would have a steeper arc of trajectory and less projectile speed. I would assume they would be inexpensive, but that may not best serve the gameplay.
Could be tactically awesome if you can burn bridges and stuff, (not only fire flaming arrows, but: torches, knocking over braziers, lighting pools of oil etc) people inclusive!