RV is best qualified to answer these, but basically you can do pretty much whatever you want with water depths/terrain levels. Its like playing with putty, the terrain is completely flexible and if you use the clipping tool right you can make perfect vertical surfaces. Theres also moulds for ramps etc.
There is dynamic lighting, and you can fudge a day/night cycle but the problem is that the map must have a global 'time of day' setting which dictates which image set is used for structures (day or night) - if you make a day > night transition, the images of the structures on the map wont change :|
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