You won't see anything in the Luzon Straits, starting on the 8th, for a while anyway. All of the invasion forces for Malaysia and points south were already by there. What you can do though is head north relatively close to Luzon, then cut across to Formosa and the Pescadores Islands. That's where the invasion forces that land in Lingayan Gulf on December 20 come from. Or, you could head for Camranh Bay Indo-China. I am reasonably certain lurker did both of those areas rather well. As for merchants, you won't see very much traffic, other than for military use, until mid-1942 when their traffic started flowing 'home'.
Those "flashes" you see are ships fleeing the Japanese advance - in theory. There is some neutral traffic in the stock game that is inappropriate, and most, but not all of it was not removed with RSRDC. High TC (anything over 512x in SH4) will result in missing contacts. Remember, 512 seconds is almost 9 minutes in real time... a lot can happen in that time frame. Also, you do have to submerge every once in a while and use the hydrophones to find "contacts" further out, then go chase them down, or stumble upon them visually.
