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I took your advice and unchecked the passable flag and rebuilt the level.
The sky still gets hit by bullets.

What are you trying to accomplish ? For best performance the sky should not be set to passable which also means it will get hit by bullets. You can use SCAN_TEXTURE to check whether the player has hit a valid target.
The (slower) alternative would be to select "PASSABLE" on the sky cube and deselect the "SOLID SKY" option in the map compiler dialog.