I have a sword in my dungeon that I want to light up the room, but when picked up to get rid of the light. Can this be done, if so how?

Pretty simple.

Place a light above your sword or wherever you find it looks best.

You'll need a script that has a property referencing the light. Then, in some code that will happen once the player has taken the sword, use the property you set up and call Deactivate() on it, which should turn it off.