[EDIT]Rolig beat me to the punch, and said it much more succinctly than I did. Oh well, can't win 'em all.

[/EDIT]
So you understand, glow and light are two very different things. But you seem to be referring to them synonymously, which is a little confusing.
When an object emits a glow, the renderer just draws a bright halo around it. It's a post-process effect. It's got nothing to do with lighting at all.
When an object emits light, it will affect the apparent luminance of all other objects around it, within its radius of effect.
Set an object to cast a red glow, and all you get is that one object glimmering red. Set it to cast red light, on the other hand, and the entire area will turn red.
If the object you spoke of had the power to wash out the coloring inside a nearby building, then it must have been emitting light, not just glow. That is, unless your description of what actually happened is in need of some clarification, which very well could be the case. Did the object actually overpower the ambient lighting, or was it just that you were able to see through the wall, to observe the glowing object from the other side?
If it's the latter, then what you observed was a draw order problem in the renderer, not an actual lighting effect. Glow and transparency, unfortunately, don't mix too well in SL. They're not rendered by the viewer in a good timely fashion to coincide properly with each other. The end result is glow appears to shine right through any 32-bit textured surface.
Regarding the PNG vs. TGA thing, either whoever told you that didn't really understand what they were talking about, or you just didn't understand what they meant. I'll explain.
It's not the source file format that will make the difference; it's the bit depth. Put simply, 32-bit textures have transparency in them, and 24-bit textures don't. And as we discussed, glow and transparency don't play well together in SL.
Here's where PNG vs. TGA comes into play, in this regard. PNG is a format that happens to support multiple forms of transparency. As such, accidental 32-bit textures are generated from that format fairly often. If so much as a single pixel is less than 100% opaque, the entire texture comes out 32-bit. An image with just 1% transparency in just one single pixel might well look totally opaque to the human observer, but as far as the computer is concerned, it's all or nothing. There's no "close enough". If it's got any transparency in it all, it's a transparent texture, a 32-bit texture.
TGA, on the other hand, only supports one form of transparency, alpha transparency. To get a 32-bit texture from a TGA file, the image has to contain an alpha channel. And in most graphics programs, it's nearly impossible to add an alpha channel by accident. If you didn't deliberately put that extra channel in there, then the resulting texture is gonna be 24-bit. There's almost no margin for error. Accidental 32-bit just doesn't happen with TGA (extreme absent mindedness notwithstanding).
So, what that person most likely meant to say was not just, "you need a TGA rather than PNG texture," but "you need a 24-bit rather than 32-bit texture, and a surefire way to make sure you have that is to source it from TGA rather than PNG."
But that doesn't mean sourcing a texture from TGA will automatically solve the problem, or that sourcing from PNG will automatically create the problem. If the texture comes from a 32-bit TGA, then it's a 32-bit texture, end of story, just like it if had come from a not fully opaque PNG. And if you're exceedingly careful with PNG not to introduce any transparency, then the texture will be 24-bit, just as if it had come from a 24-bit TGA.
If I've been talking over your head, and you need to know more about bit depth, alpha channels, etc., in order to follow me, read the stickied guide to alpha transparency, at the top of the Texturing Tips forum.