Shadows, especially with regards to ATI, seem to be coming up in a lot of different threads, so I thought I'd chime in give the full story: with the ATI 3.6 drivers we noticed a slight glitch when the ships change from the 2nd most detailed LOD to the most detailed when you zoom in and out. ATI has been made aware of the problem. Some people have figured out how to enable shadows with the 3.6 drivers and they could check this out themselves. It is kind of hard to see as it only happens for one frame and is easiest to reproduce in multiplayer games when you only have one ship around.
So HW2 detects the 3.6 drivers and disables shadows simply so you don't see this glitch. If you enable shadows in the graphics settings screen with 3.6 or older drivers you don't get them because that option gets overridden. You do still get correct lighting which looks good, you just don't see a nice shadow from the corvette's gun casting on to itself.
Since HW2 detects the driver version and disables features as needed if you have a newer driver than HW2 (eg the 3.7 ATI drivers) it doesn't know what bugs may exist so doesn't force any features off. So once you've upgraded to the 3.7 drivers turning shadows on will actually turn them on. If you don't like their stylized look or their performance hit then just turn them off. Shadows, especially self shadows like HW2 has, are a lot of extra work to compute which is why you don't see them in older games at all. I happen to really like watching a corvette squad fly around kicking ass with shadows enabled and will gladly take the performance hit. As the ships twist and turn and the shadow moves across them looks really nice is motion, way better than the screen shots imply.
When the ships are rendered there are multiple render paths, including a path for DX9 level cards that support the OpenGL fragment program extension. There is not a unique one for the 9500+ and GeForceFX, they both render the same code. So if you were to trade your Radeon 9500 in for a 5900 you'd be disappointed to learn the shadows are the same.
The shadows are a bit blocky on the larger ships like the mothership, but that is just their style. Enjoy them on your warrior ships while you go destroy your enemies
