I've been able to get this working by removing NOLOD from line 95 in shadows.c and and setting viewShadow lod to shadow_lod, so it should look like this:

Code:
viewShadow->flags |= SHOW|UNTOUCHABLE|NOSHADOW|NOPARTICLE|NOSKY;
viewShadow->lod = shadow_lod;


With this code I can get lod offsets for shadows working nicely

3D Gamestudio A8 Pro
AMD FX 8350 4.00 Ghz
16GB RAM
Gigabyte GeForce GTX 960 4GB