I think that you mean the effect that the sharp edges of the houses look smooth.
That is because auf the models. If you want to have sharp edges while goroud shading, you have to build them with seperate planes for each side, DON'T merge them.

http://www.puppenheim.org/
http://www.wuerfels-welt.de
Old Game Tutorial: http://www.puppenheim.org/MITutorial.zip
Free Game Editor: http://puppenheim.org/AlienalsWeihnachtsmann.zip
http://www.puppenheim.org/blender_starting_main_settings.txt