the clip distance is how close you can get to things or your position / point of view is and the point of measure is from the outer most point so for a sub its not the conning tower but the side of the hull so a 1 foot clip distance has you about 5 feet away is the closest you can get.
as for free cam try it with heavy fog and rain and you cant see anything untill your right on top of it so the fog is more like a wall then anything like the transparent haze it should be.
another interesting note i found out while testing single mission elements were working and generating as they should is if you get a certain distance away from your sub (in this case i was just outside tokyo bay and flew free cam over to tokyo harbor) the game stops generating terrain so all you see is grey in front of you. i found the ships but the port wasnt there and the land wasnt there either lol.