If you have SH4, you can check this out for yourself.
Go to Documents>SH4>data>cfg>main.cfg
It'll look almost the same compared to SH3, including the line under [VIDEO]
DynamicShadows=No
You can change it to yes, but like later versions of SH3 it won't work.
...actually...
That'd be something to test. If SH3 had dynamic shadows in the stock version, but just had them line disabled.
...Could the same be in SH4?
...I have to try this...