I edited Matt's code and converted it down to ps2.0 with 4 lights working!
Here's a screenshot:



In line 141 of the level_normal mapping file you can change the ambience of the level, all textures have to be flat else they screw up etc etc


Normal Mapping Level FX File Code:

// -------------------------------------------------------------
// Diffuse and specular shader for world geometry
// -------------------------------------------------------------
//this is a 3 pass shader rendering 3 lights in each pass,3 rd pass has the last light

float4x4 matWorldViewProj;
float4x4 matWorld;
float4 vecLightPos[8]; //light position
float4 vecLightColor[8]; //light position
float4 vecViewPos;

texture entSkin1; //this is the color map
texture mtlSkin1; //this is the normal map..define in your shader defs

sampler ColorMapSampler = sampler_state
{
Texture = <entSkin1>;
MinFilter = Linear;
MagFilter = Linear;
MipFilter = Linear;
AddressU = wrap;
AddressV = wrap;
};


sampler BumpMapSampler = sampler_state
{
Texture = <mtlSkin1>;
MinFilter = Linear;
MagFilter = Linear;
MipFilter = Linear;
AddressU = wrap;
AddressV = wrap;
};

///////////////////////////////////////////////////////////////////////////////////////////////////////////////
//first pass
///////////////////////////////////////////////////////////////////////////////////////////////////////////////
// -------------------------------------------------------------
// Output channels
// -------------------------------------------------------------
struct VS_OUTPUT0
{
float4 Pos : POSITION;
float2 Tex : TEXCOORD0;

float3 Light1 : TEXCOORD2;
float3 View1 : TEXCOORD3;
float3 Att1 : TEXCOORD4;

float3 Light2 : TEXCOORD5;
float3 View2 : TEXCOORD6;
float3 Att2 : TEXCOORD7;
};

// -------------------------------------------------------------
// vertex shader function (input channels)
// -------------------------------------------------------------
VS_OUTPUT0 VS_PASS0(float4 Pos : POSITION, float2 texcoord0 : TEXCOORD0, float3 Normal : NORMAL, float3 Tangent : TEXCOORD0 )
{
VS_OUTPUT0 Out = (VS_OUTPUT0)0;
Out.Pos = mul(Pos, matWorldViewProj); // transform Position

// compute the 3x3 tranform matrix
// to transform from world space to tangent space
float3x3 worldToTangentSpace;
worldToTangentSpace[0] = mul(Tangent, matWorld);
worldToTangentSpace[1] = mul(cross(Tangent, Normal), matWorld);
worldToTangentSpace[2] = mul(Normal, matWorld);

Out.Tex = texcoord0.xy;

float3 PosWorld = mul(Pos, matWorld);
float LightRange = 0.002;

//light 1
float3 Light1 = PosWorld - vecLightPos[1] ;
Out.Light1.xyz = mul(worldToTangentSpace, -Light1); // L

float3 Viewer1 = PosWorld - vecViewPos;
Out.View1 = mul(worldToTangentSpace, -Viewer1); // V

Out.Att1 = Light1 * LightRange; // Point light

//light 2
float3 Light2 = PosWorld - vecLightPos[2] ;
Out.Light2.xyz = mul(worldToTangentSpace, -Light2); // L

float3 Viewer2 = PosWorld - vecViewPos;
Out.View2 = mul(worldToTangentSpace, -Viewer2); // V

Out.Att2 = Light2 * LightRange; // Point light
return Out;
}


struct PS_INPUT0
{
float2 Tex : TEXCOORD0;

float3 Light1 : TEXCOORD2;
float3 View1 : TEXCOORD3;
float3 Att1 : TEXCOORD4;

float3 Light2 : TEXCOORD5;
float3 View2 : TEXCOORD6;
float3 Att2 : TEXCOORD7;
};

// -------------------------------------------------------------
// Pixel Shader (input channels):output channel
// -------------------------------------------------------------

float4 PS_PASS0( PS_INPUT0 psInStruct ):COLOR
{

float4 color = tex2D(ColorMapSampler, psInStruct.Tex); // fetch color map
float3 bumpNormal = 2 * (tex2D(BumpMapSampler, psInStruct.Tex) - 0.5); // fetch bump map
float4 gloss = tex2D( BumpMapSampler, psInStruct.Tex );

//light1
float3 LightDir1 = normalize(psInStruct.Light1);
float3 ViewDir1 = normalize(psInStruct.View1);
float4 diff1 = saturate(dot(bumpNormal, LightDir1)); // diffuse component
float shadow1 = saturate(4 * diff1);
float3 Reflect1 = normalize(2 * diff1 * bumpNormal - LightDir1); // R
float4 spec1 = pow(saturate(dot(Reflect1, ViewDir1)), 15);
float4 Attenuation1 = saturate(dot(psInStruct.Att1, psInStruct.Att1));

//light2
float3 LightDir2 = normalize(psInStruct.Light2);
float3 ViewDir2 = normalize(psInStruct.View2);
float4 diff2 = saturate(dot(bumpNormal, LightDir2)); // diffuse component
float shadow2 = saturate(4 * diff2);
float3 Reflect2 = normalize(2 * diff2 * bumpNormal - LightDir2); // R
float4 spec2 = pow(saturate(dot(Reflect2, ViewDir2)), 15);
float4 Attenuation2 = saturate(dot(psInStruct.Att2, psInStruct.Att2));

return
(
(0.1 * color) + //ambient
((shadow1 * (color * diff1 + (spec1*gloss.w)) * (1 -Attenuation1))*vecLightColor[1])+
((shadow2 * (color * diff2 + (spec2*gloss.w)) * (1 -Attenuation2))*vecLightColor[2])

);
}

///////////////////////////////////////////////////////////////////////////////////////////////////////////////
//second pass
///////////////////////////////////////////////////////////////////////////////////////////////////////////////

// -------------------------------------------------------------
// Output channels
// -------------------------------------------------------------
struct VS_OUTPUT1
{
float4 Pos : POSITION;
float2 Tex : TEXCOORD0;

float3 Light3 : TEXCOORD2;
float3 View3 : TEXCOORD3;
float3 Att3 : TEXCOORD4;

float3 Light4 : TEXCOORD5;
float3 View4: TEXCOORD6;
float3 Att4 : TEXCOORD7;
};

// -------------------------------------------------------------
// vertex shader function (input channels)
// -------------------------------------------------------------
VS_OUTPUT1 VS_PASS1(float4 Pos : POSITION, float2 texcoord0 : TEXCOORD0, float3 Normal : NORMAL, float3 Tangent : TEXCOORD0 )
{
VS_OUTPUT1 Out = (VS_OUTPUT1)0;
Out.Pos = mul(Pos, matWorldViewProj); // transform Position

// compute the 3x3 tranform matrix
// to transform from world space to tangent space
float3x3 worldToTangentSpace;
worldToTangentSpace[0] = mul(Tangent, matWorld);
worldToTangentSpace[1] = mul(cross(Tangent, Normal), matWorld);
worldToTangentSpace[2] = mul(Normal, matWorld);

Out.Tex = texcoord0.xy;

float3 PosWorld = mul(Pos, matWorld);
float LightRange = 0.002;

//light 3
float3 Light3 = PosWorld - vecLightPos[3] ;
Out.Light3.xyz = mul(worldToTangentSpace, -Light3); // L

float3 Viewer3 = PosWorld - vecViewPos;
Out.View3 = mul(worldToTangentSpace, -Viewer3); // V

Out.Att3 = Light3 * LightRange; // Point light


//light 4
float3 Light4 = PosWorld - vecLightPos[4] ;
Out.Light4.xyz = mul(worldToTangentSpace, -Light4); // L

float3 Viewer4 = PosWorld - vecViewPos;
Out.View4 = mul(worldToTangentSpace, -Viewer4); // V

Out.Att4 = Light4 * LightRange; // Point light
return Out;
}


struct PS_INPUT1
{
float2 Tex : TEXCOORD0;

float3 Light3 : TEXCOORD2;
float3 View3 : TEXCOORD3;
float3 Att3 : TEXCOORD4;

float3 Light4 : TEXCOORD5;
float3 View4: TEXCOORD6;
float3 Att4 : TEXCOORD7;
};

// -------------------------------------------------------------
// Pixel Shader (input channels):output channel
// -------------------------------------------------------------
float4 PS_PASS1( PS_INPUT1 psInStruct ):COLOR
{

float4 color = tex2D(ColorMapSampler, psInStruct.Tex); // fetch color map
float3 bumpNormal = 2 * (tex2D(BumpMapSampler, psInStruct.Tex) - 0.5); // fetch bump map
float4 gloss = tex2D( BumpMapSampler, psInStruct.Tex );

//light3
float3 LightDir3 = normalize(psInStruct.Light3);
float3 ViewDir3 = normalize(psInStruct.View3);
float4 diff3 = saturate(dot(bumpNormal, LightDir3)); // diffuse component
float shadow3 = saturate(4 * diff3);
float3 Reflect3 = normalize(2 * diff3 * bumpNormal - LightDir3); // R
float4 spec3 = pow(saturate(dot(Reflect3, ViewDir3)), 15);
float4 Attenuation3 = saturate(dot(psInStruct.Att3, psInStruct.Att3));

//light4
float3 LightDir4 = normalize(psInStruct.Light4);
float3 ViewDir4 = normalize(psInStruct.View4);
float4 diff4 = saturate(dot(bumpNormal, LightDir4)); // diffuse component
float shadow4 = saturate(4 * diff4);
float3 Reflect4 = normalize(2 * diff4 * bumpNormal - LightDir4); // R
float4 spec4 = pow(saturate(dot(Reflect4, ViewDir4)), 15);
float4 Attenuation4 = saturate(dot(psInStruct.Att4, psInStruct.Att4));

return
(
((shadow3 * (color * diff3 + (spec3*gloss.w)) * (1 -Attenuation3))*vecLightColor[3])+
((shadow4 * (color * diff4 + (spec4*gloss.w)) * (1 -Attenuation4))*vecLightColor[4])


);
}

// -------------------------------------------------------------
// techniques//
// -------------------------------------------------------------
technique three_pass
{
pass P0
{
alphablendenable=false;
srcblend=zero;
// compile shaders
VertexShader = compile vs_2_0 VS_PASS0();
PixelShader = compile ps_2_0 PS_PASS0();
}

pass P1
{
//blend second pass additively with first
alphablendenable=true;
srcblend=one;
destblend=one;

// compile shaders
VertexShader = compile vs_2_0 VS_PASS1();
PixelShader = compile ps_2_0 PS_PASS1();
}
}



And Normal Mapping Entity FX File Code



// -------------------------------------------------------------
// Diffuse and specular shader for models
// -------------------------------------------------------------
//this is a 3 pass shader rendering 3 lights in each pass,3 rd pass has the last light

float4x4 matWorldViewProj;
float4x4 matWorld;
float4 vecLightPos[8]; //light position
float4 vecLightColor[8]; //light position
float4 vecViewPos;

texture entSkin1; //this is the color map
texture entSkin2; //this is the normal map

sampler ColorMapSampler = sampler_state
{
Texture = <entSkin1>;
MinFilter = Linear;
MagFilter = Linear;
MipFilter = Linear;
AddressU = wrap;
AddressV = wrap;
};


sampler BumpMapSampler = sampler_state
{
Texture = <entSkin2>;
MinFilter = Linear;
MagFilter = Linear;
MipFilter = Linear;
AddressU = wrap;
AddressV = wrap;
};

///////////////////////////////////////////////////////////////////////////////////////////////////////////////
//first pass
///////////////////////////////////////////////////////////////////////////////////////////////////////////////
// -------------------------------------------------------------
// Output channels
// -------------------------------------------------------------
struct VS_OUTPUT0
{
float4 Pos : POSITION;
float2 Tex : TEXCOORD0;

float3 Light1 : TEXCOORD2;
float3 View1 : TEXCOORD3;
float3 Att1 : TEXCOORD4;

float3 Light2 : TEXCOORD5;
float3 View2 : TEXCOORD6;
float3 Att2 : TEXCOORD7;
};

// -------------------------------------------------------------
// vertex shader function (input channels)
// -------------------------------------------------------------
VS_OUTPUT0 VS_PASS0(float4 Pos : POSITION, float2 texcoord0 : TEXCOORD0, float3 Normal : NORMAL, float3 Tangent : TEXCOORD2 )
{
VS_OUTPUT0 Out = (VS_OUTPUT0)0;
Out.Pos = mul(Pos, matWorldViewProj); // transform Position

// compute the 3x3 tranform matrix
// to transform from world space to tangent space
float3x3 worldToTangentSpace;
worldToTangentSpace[0] = mul(Tangent, matWorld);
worldToTangentSpace[1] = mul(cross(Tangent, Normal), matWorld);
worldToTangentSpace[2] = mul(Normal, matWorld);

Out.Tex = texcoord0.xy;

float3 PosWorld = mul(Pos, matWorld);
float LightRange = 0.01;

//light 1
float3 Light1 = PosWorld - vecLightPos[1] ;
Out.Light1.xyz = mul(worldToTangentSpace, -Light1); // L

float3 Viewer1 = PosWorld - vecViewPos;
Out.View1 = mul(worldToTangentSpace, -Viewer1); // V

Out.Att1 = Light1 * LightRange; // Point light

//light 2
float3 Light2 = PosWorld - vecLightPos[2] ;
Out.Light2.xyz = mul(worldToTangentSpace, -Light2); // L

float3 Viewer2 = PosWorld - vecViewPos;
Out.View2 = mul(worldToTangentSpace, -Viewer2); // V

Out.Att2 = Light2 * LightRange; // Point light

return Out;
}


struct PS_INPUT0
{
float2 Tex : TEXCOORD0;

float3 Light1 : TEXCOORD2;
float3 View1 : TEXCOORD3;
float3 Att1 : TEXCOORD4;

float3 Light2 : TEXCOORD5;
float3 View2 : TEXCOORD6;
float3 Att2 : TEXCOORD7;

};

// -------------------------------------------------------------
// Pixel Shader (input channels):output channel
// -------------------------------------------------------------

float4 PS_PASS0( PS_INPUT0 psInStruct ):COLOR
{

float4 color = tex2D(ColorMapSampler, psInStruct.Tex); // fetch color map
float3 bumpNormal = 2 * (tex2D(BumpMapSampler, psInStruct.Tex) - 0.5); // fetch bump map
float4 gloss = tex2D( BumpMapSampler, psInStruct.Tex );

//light1
float3 LightDir1 = normalize(psInStruct.Light1);
float3 ViewDir1 = normalize(psInStruct.View1);
float4 diff1 = saturate(dot(bumpNormal, LightDir1)); // diffuse component
float shadow1 = saturate(4 * diff1);
float3 Reflect1 = normalize(2 * diff1 * bumpNormal - LightDir1); // R
float4 spec1 = pow(saturate(dot(Reflect1, ViewDir1)), 15);
float4 Attenuation1 = saturate(dot(psInStruct.Att1, psInStruct.Att1));

//light2
float3 LightDir2 = normalize(psInStruct.Light2);
float3 ViewDir2 = normalize(psInStruct.View2);
float4 diff2 = saturate(dot(bumpNormal, LightDir2)); // diffuse component
float shadow2 = saturate(4 * diff2);
float3 Reflect2 = normalize(2 * diff2 * bumpNormal - LightDir2); // R
float4 spec2 = pow(saturate(dot(Reflect2, ViewDir2)), 15);
float4 Attenuation2 = saturate(dot(psInStruct.Att2, psInStruct.Att2));

return
(
(0.15 * color) + //ambient
((shadow1 * (color * diff1 + (spec1*gloss.w)) * (1 -Attenuation1))*vecLightColor[1])+
((shadow2 * (color * diff2 + (spec2*gloss.w)) * (1 -Attenuation2))*vecLightColor[2])
);
}

///////////////////////////////////////////////////////////////////////////////////////////////////////////////
//second pass
///////////////////////////////////////////////////////////////////////////////////////////////////////////////

// -------------------------------------------------------------
// Output channels
// -------------------------------------------------------------
struct VS_OUTPUT1
{
float4 Pos : POSITION;
float2 Tex : TEXCOORD0;

float3 Light3 : TEXCOORD2;
float3 View3 : TEXCOORD3;
float3 Att3 : TEXCOORD4;

float3 Light4 : TEXCOORD5;
float3 View4: TEXCOORD6;
float3 Att4 : TEXCOORD7;
};

// -------------------------------------------------------------
// vertex shader function (input channels)
// -------------------------------------------------------------
VS_OUTPUT1 VS_PASS1(float4 Pos : POSITION, float2 texcoord0 : TEXCOORD0, float3 Normal : NORMAL, float3 Tangent : TEXCOORD0 )
{
VS_OUTPUT1 Out = (VS_OUTPUT1)0;
Out.Pos = mul(Pos, matWorldViewProj); // transform Position

// compute the 3x3 tranform matrix
// to transform from world space to tangent space
float3x3 worldToTangentSpace;
worldToTangentSpace[0] = mul(Tangent, matWorld);
worldToTangentSpace[1] = mul(cross(Tangent, Normal), matWorld);
worldToTangentSpace[2] = mul(Normal, matWorld);

Out.Tex = texcoord0.xy;

float3 PosWorld = mul(Pos, matWorld);
float LightRange = 0.01;

//light 3
float3 Light3 = PosWorld - vecLightPos[3] ;
Out.Light3.xyz = mul(worldToTangentSpace, -Light3); // L

float3 Viewer3 = PosWorld - vecViewPos;
Out.View3 = mul(worldToTangentSpace, -Viewer3); // V

Out.Att3 = Light3 * LightRange; // Point light


//light 4
float3 Light4 = PosWorld - vecLightPos[4] ;
Out.Light4.xyz = mul(worldToTangentSpace, -Light4); // L

float3 Viewer4 = PosWorld - vecViewPos;
Out.View4 = mul(worldToTangentSpace, -Viewer4); // V

Out.Att4 = Light4 * LightRange; // Point light
return Out;
}


struct PS_INPUT1
{
float2 Tex : TEXCOORD0;

float3 Light3 : TEXCOORD2;
float3 View3 : TEXCOORD3;
float3 Att3 : TEXCOORD4;

float3 Light4 : TEXCOORD5;
float3 View4: TEXCOORD6;
float3 Att4 : TEXCOORD7;
};

// -------------------------------------------------------------
// Pixel Shader (input channels):output channel
// -------------------------------------------------------------
float4 PS_PASS1( PS_INPUT1 psInStruct ):COLOR
{

float4 color = tex2D(ColorMapSampler, psInStruct.Tex); // fetch color map
float3 bumpNormal = 2 * (tex2D(BumpMapSampler, psInStruct.Tex) - 0.5); // fetch bump map
float4 gloss = tex2D( BumpMapSampler, psInStruct.Tex );

//light3
float3 LightDir3 = normalize(psInStruct.Light3);
float3 ViewDir3 = normalize(psInStruct.View3);
float4 diff3 = saturate(dot(bumpNormal, LightDir3)); // diffuse component
float shadow3 = saturate(4 * diff3);
float3 Reflect3 = normalize(2 * diff3 * bumpNormal - LightDir3); // R
float4 spec3 = pow(saturate(dot(Reflect3, ViewDir3)), 15);
float4 Attenuation3 = saturate(dot(psInStruct.Att3, psInStruct.Att3));

//light4
float3 LightDir4 = normalize(psInStruct.Light4);
float3 ViewDir4 = normalize(psInStruct.View4);
float4 diff4 = saturate(dot(bumpNormal, LightDir4)); // diffuse component
float shadow4 = saturate(4 * diff4);
float3 Reflect4 = normalize(2 * diff4 * bumpNormal - LightDir4); // R
float4 spec4 = pow(saturate(dot(Reflect4, ViewDir4)), 15);
float4 Attenuation4 = saturate(dot(psInStruct.Att4, psInStruct.Att4));

return
(
((shadow3 * (color * diff3 + (spec3*gloss.w)) * (1 -Attenuation3))*vecLightColor[3])+
((shadow4 * (color * diff4 + (spec4*gloss.w)) * (1 -Attenuation4))*vecLightColor[4])

);
}

// -------------------------------------------------------------
// techniques//
// -------------------------------------------------------------
technique two_pass
{
pass P0
{
alphablendenable=false;
srcblend=zero;
// compile shaders
VertexShader = compile vs_2_0 VS_PASS0();
PixelShader = compile ps_2_0 PS_PASS0();
}

pass P1
{
//blend second pass additively with first
alphablendenable=true;
srcblend=one;
destblend=one;

// compile shaders
VertexShader = compile vs_2_0 VS_PASS1();
PixelShader = compile ps_2_0 PS_PASS1();
}
}


Then You Just Use Matt's Standard Lighting Shader Code And Effect Loading Code (You Can Get It At The Start Of The Thread)
Also to make the dynamic shadows appear nicer on the level geometry and stuff put this line in your levels main function:

mat_shadow.alpha = 25;

Enjoy:)

Matt Coles