Edit: Got it.

But:
I stumbled on to another problem. My player character models shadow is casted only on to a floor, so I suppose it's using Z buffer shadow as in default. I have tried to enable Stencil buffer shadows with this: var shadow_stencil = on; in various places, but it doesn't seem to work. The shadow still ignores everything, for example: I have a wall where I would like the shadow to be casted, but the shadow just goes under it.

Noob question I suppose, but I can't seem to figure it out. How do I enable the stencil buffer shadows?