Yeah, Boat was showing this game around the apartment and after talking about all the different things possible I ended up buying the game so we can try it out and see what we can do. I did upvote it on greenlight, it was (and is) a really interesting game.
My modder sense is tingling. I'm quite interested in seeing what you're planning especially if you think you're hitting the poly limit. If you would have, the export log would have said so. Just a friendly tip, the forums are quick to yell "too detailed" on pretty much anything over 1000 triangles, but sounds like you're doing something completely new here. I'm intrigued.
We actually weren't sure on what the polylimit was, do you know exactly what is the cap? The object I used was originally a high quality model for a project later in life, and so after a lot of trimming I got it down somewhat but it isn't a true low poly yet. I'm curious, do people here not like >1000 tris in models because it just doesn't fit with blockland or is there some sort of bottleneck transferring the files or multiplayer lag issues?
And to satisfy your modder sense:

There is really only 1 (technically 2) objects that will go close to what we heard of as the polylimit (11000 tris), at least what I can think of right now.
You might want to check out my General Blender help thread too if you're having problems with transferring .blends from 2.6 to 2.49.
Was there information in that solved something particular like this? I skimmed through that thread before posting but I only really went through your post.
You do not need a col0 empty. The collision mesh should be named col0 (I think adding any number after col works) and not be parented to anything.
Interesting... the first link actually told us to do that:
Now, for collision. This has to be a low poly outline of your model, preferably just a cube. And in order for it to work you must make a new empty and name it Col0. Then parent your cube to Col0 and parent Col0 to shape.
It could be just personal preference but I feel uneasy when all empties are not at the center of the model. Moving the detail32 empty to the center might do something or it might not. I've never actually tried if moving that elsewhere does anything.
Oh, I never planned on having them with an offset when I got things working. I mainly did that to show what was there, and what wasn't for easy identifying for you.
Turning off double sided is preferred as I think the engine renders all faces in the visible distance at all times.
Of all things, I did the rookie mistake and forgot to turn off double sided. I guess, because of the number of iterations we did of a basic setup to get it working I might have missed a step. xD
Thanks A LOT for the help! I learned enough to get the ball rolling now.