you need these command line settings:
" -htl -pcx32 -jpgtga -fps -fov 0.39 "
the -fov is optional but it makes things look a lot ... more impressing

the -fps is, of course, also optional.
Then simply put the files into the appropriate folder (although it should work from any folder) and they should work from there.
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As for LAN gaming. Add the IPs to the IPbox in the multiplayer options. Then you should see any game hosted by one of the IPs. (make sure PXO is NOT checked). If the game crashes whenever you try creating a game you have exactly the same problem i have. (this doesnt happen with 3.5.5 or earlier)
Best thing is to try, though.