For milkshape:
Make your model
Make the name of every group end with 32. (example: body32)
Duplicate everything and end the name of that/those groups with 31
Then duplicate that duplicate and end that name with 0
Create a collision mesh ending named collision-1
The groups ending with 32 will be what the player sees up close
The groups ending with 0 will be what the game draws the shadow from, and it will draw this mesh at a far distance
The groups ending with 31 will be drawn at a distance right before the game draws the 0 groups. It sounds unnecessary to have this group but it won't work without it.