I don't know what it's like with TWOS, but actually there is or was a Sub Exhausts.dat in the Library folder, then the file had to be adapted with .fx in the Submarine folder for the respective boot. and of course smoke textures for each boat type in the Textures folder! Only the modders at TWS can answer you what's actually going on!! With Sh 3 you could do all of this in the sim file, if I remember correctly!
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