Two comments:

- Shadows on invisible models should be possible by using nontransparent models with an FFP effect that renders only into the z buffer, but nothing to the screen buffer. I haven't tried it, though.

- I don't think that it makes sense to use view entities for a 2D game. They are not meant for simulating level entities. All the collision detection and lighting functions work with level entities, so there's no real reason why someone would want to use view entities. You just need to restrict the movement of the level entities to 2 dimensions.

However, a useful feature could be to have sky layers at a certain z position, so that some level entities are in front and some behind the sky layers.