is it a good thing to create a whole level in a model editor or will that slow down Gamestudio?

well sometimes you need to do complex things that are difficult o achieve with wed, but as long as you export your level made in med to wmp , i cant see a problem with that

Yep you can but as with all methods and methadologies (word may be a bit too big for me to use)and in this case, issues with lighting and shades is pretty much an expected.
You can mix and match with brushes/level geometries and sprites to get an overall look and feel to the game too but the one factor why I favour this approach is LOD control and scene managment.

Game studio works faster with models than with cubes.

Yes, cro_games is right, just make sure your level model is split into parts with about 1000 polies - this seems to be optimal for performance

Yep it does but try tweaking models for shade effects, not as good or as easy with level geometry, or using dynamic lights without increasing poly count to smooth out the dynamic light effects or getting trace to return a viable consistant hit let alone see the models.

All in all, develop to suit your medium of choice is what I am trying to say, like models will be good for environments with a lot of ambient lights and blocks are good for moody environments while both will give you what you are used to playing with

I just tried developing a tunnel/cavern system game with models alone! Guess what, I still havnt sorted out shading, lights and so on which means I have to go back to blocks to get the darkmoody effects youd expect from a tunnel/cavern based game.
Works great for flying and outdoor games though.

first of all the benefit of the level geometry is the bsp management, so also pretty huge indoor levels(or cities etc...) are fast.
Another benefit is that with the lightmap. That you can't do with models, because you can't give them a 2nd uv set in a6/a7 => you need large textures, where you baked the lighting.
The deficits of bsp-management is, that your level can't be that complex, becasue for every little details the bsp-tree bcomes more complex( just make some hight detailed level and then look at the little red lines if you press 2x F11)

so the best way to make it level in a6/a7 is probably to build the main level with blocks and then add a lot of models, to make it high-detailed (i think the unreal engine(2?) used also such static models for walls, to make it look hight-detailed and deal with a good fps)

With Unreal 2 tech, Epic removed reliance on visibility calcs from the BSP tree and now rely specifically on portals and anti-portals.

BSP geometry now is used to create the basic "shell" for a map - particularly in ones that take place inside buildings or other such areas that BSP geometry is well suited to.

That said, there are entire levels in Unreal Tournament 2k4 where BSP is only used to create a huge, hollowed out volume in which to place a level that was entirely modeled in a 3rd party app.

One map in particular, though I can't remember the name, does this to excellent effect. The playable portion of the map is a sort of mountainous/rocky region set in the middle of a huge sea of lava. There are multi-textured/uv mapped and animated "lava falls", "rivers" that move through the surrounding lave sea, a couple "whirlpools" off in the distance.. The effect is gorgeous and only uses 1 large subtractive brush - actually maybe two to bisect the level, for optimization purposes. The rest is all custom models.

When you look at it in the editor, you see that it's split up into chunks that are then re-assembled in the editor.

It occurs to me that the same can be done with 3DGS to good effect. I'm planning on this kind of approach for a project I'm working on. The challenge will be breaking the map up intelligently to make for as optimized a map as possible.