Apparently, my previous installation of SH3 was bugged , and I think that goes a long way to explain some of the frustrations I documented in this thread.
I recently re-installed SH3 and things are going much, much better this time around.
1. For the first time I actually encountered airpolanes on my patrol. I then saw a screen that gave me three options like: a) engage the enemy b) maintain current orders c) dive to periscope depth. This alone proves that my previous installation had to have been bugged because I NEVER saw that screen which gives you three options when you encounter an enemy.
2. I now detect ships that are actually there. In my previous installation, I would spend real-life hours upon hours going on patrol after patrol, and never once engaged in a proper fight. I would detect ships on my map screen, but these were almost always false alarms or phantom ships that weren't actually there.

This leads to number 3.
3. I realize that going over TC 256 messes up the enemy detection system on the map screen. This time I always stay below 256 TC on the map screen and I detect enemy aircrafts and ships just fine.
I don't know if it's just my compouter, but 256 time compression is the magic number. If I go above that speed, my enemy detection gets messed up which leads to phantom ships on my map that aren't actually there.
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I just had a very enjoyable battle with a huge cargo ship that survived two torpedoes. I had to finish her off with the deck gun. I never had an encounter like this on my previous installation, which again drives home the point that something was messed up somewhere.
I also watched Das Boot for the first time, and I'm really looking forward to playing some more. Maybe it's just me, but it seems like certain parts of SH 3 was
directly inspired by that movie

?