Quote: "be able to look down a balcony without walls, but still not be able to walk (fall) down that end"
You could make a half-height obstacle, and delete the visible object
Quote: "be able to have "all against all" battles in an Deathmatch Game"
That is tough, but maybe you could emulate it by switching the AI of the characters frequently so they are all "enemies" at one stage or another. It would also force them to move around more and switch targets. For example, when a character defeats someone, randomly pick wheher he becomes friendly, enemy or neutral.