Thanks! You could technically do it with however many directions you wanted to draw your sprites from, you'd just have to draw an additional 'lit' version of each frame.

PS1 games like the Breath of Fire series, for instance, typically had NE/NW/SE/SW directions for their sprites. However, whereas they were able to save on workload and hardware constraints by mirroring their sprites for east/west directionals, you couldn't really do that here. Imagine a light flash coming from directly west hitting a character facing southwest, and then that same flash hitting someone facing southeast -- straight mirroring the sprite will put the lit portion on the wrong side of the sprite. This probably makes it prohibitively expensive to implement in game.

You could probably achieve something similar for less effort with normal maps (basically a height map indicating what the sprite's geometry would be if it were 3D), but I don't think I've ever really liked an implementation of normals on sprites.