[ZaPPPa]

Fired three torpedoes at a Old Medium Split Freighter with depth 1 meter (as shallow at it will allow it to go). When running, the depth on all three was definitely deeper than 1 meter. Followed the first one all the way onto the hull and the torpedoe disappeared, apparently went straight through the hull and kept going. Did another torpedoe on magnetic and the same thing happened. The third one passed inches below the hull (I think) and the magnetic detonator did nothing.

I will do a complete reinstall tomorrow, because I have a feeling the tinkering with mods has completely disabled the collision detection in SH4, making torpedoes unaware of ships and pass straight through as if nothing was there. I'll let you know the results when I've got everything up and running again.

UPDATE: Uninstalled and re-installed all mods and tried again. Came across a large modern composite freighter and fired three torpedoes:

1: MK10, Contact, 2 mtr depth, 55 degree angle, 700 mtrs. HIT! Hurray! Ran a little deep I guess. It hit the hull at around 4-6 mtr depth.
2: MK10, Magnetic, 2 mtr depth, 80 degree angle, 600 mtrs. Miss. Gyro angle problem ran right
3: MK10, Magnetic, 2 mtr depth, 90 degree, 600 mtrs, HIT! Exact same spot as previous torpedoe (4-6 mtr deep).. Impressive lightshow as a result.

It seems like running your torpedoe at anything less than 4 mtr deep will result in it running at its minimum depth, which seems to be 4 mtrs. Not a big deal, but small ships are going to be tough to hit on contact only.