As I mentioned before, even though dynamic shadows are possible, they destroy your framerate, so much to the point they are ultimately useless for a game (at this time anyway). Here's a video I uploaded to show a small level in FPSC using dynamic shadows.
http://www.youtube.com/watch?v=OUjQPFwLpfc&feature=channel_page
The video shows a published one-level room, with 4 dynamic entities casting shadows by one dynamic light. The highest framerate I was able to acheive in this game
using Project Blue V1.15 was 30 FPS(this was tested WITHOUT running FRAPS). Testing the same room without dynamic shadows enabled, and my frames reached 112 uncapped.
Kravenwolf