There is a difference between the game and real life, of course. The Mark 16 did indeed have a larger warhead of 1260lbs torpex (which is modeled in SH4 & FotRSU - I missed a line in a previoius post), while the Mark 14 mod3 had 668 (ref
NavWeaps). However, the game also has them available in 1943, while in real life, they were never used in WWII. The torpedo is "simulated" to have a larger damage area, which does make it more powerful in the game... I am not certain how the game handles depth-keeping as opposed to actual pre-mature detonations or duds. All three settings reside in one file, so I would assume that the game turns them on or off as a group with the menu's settings... however, again, the damage imparted from your torpedo is still just a roll of the dice. The closer the torpedo is to the ship when it explodes, the greater the chance of more damage, but, it is still a "chance" kind of thing... For the purposes of FotRSU, it would not be appropriate to have you able to obliterate any and all ships with a single Mark 16.
As for the radar, remember that you are on a "moving" ship, and I'm talking about the roll of the sea. Your rotating antennae has a "beam" that it shoots out and then tries to "collect" the reflections. The bobbing to and fro has an impact on the perceived range, if it works at all. It is entirely possible for a ship to have seen you, turned and attempted to ram you, or just was just on an intercept course quite by accident. Check your watch crew though...