They define where the shockwaves start.
Oh. Well that would explain how I didn't see much - I was looking for the right subsystem size to get the model to actually split in those positions during it's death, and I'd turned shockwaves off to get a better view of exactly where it split. :\
Ah well - wouldn't help achieve the top/bottom split effect you're after Raptor, but you could use splits to get some shockwaves eminating out of some of the basestar's hanger bays at least.
About the plating, it looks like plastic primarily because each plate only has one colour - a little like lego bricks really. Aldo devised a very effective plating technique which he posted a while back, which I'll write up and stick in the wiki if you're interested?
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Back OT, it seems that the faulty normals problem may arise from the fact that the Hera isn't triangulated. However, when triangulated, a bigger problem arises - it's polycount doubles to 20 000, meaning PCS is unable to convert. I deleted all the engines, bringing it down to 12 000 and allowing it to convert, but now Fred crashes as soon as it even tries to open it.
Basically, you're going to need to cut down on the polycount if you want it to work properly in game, because it's only going to get much much worse as you add turrets and anything else.
One of the biggest causes of the massive polycount will be the little indents that you've got all over the hull. Remember that whenever you're adding greebles, you have a choice between things that indent into the hull or bulge out of it.
Any object you extrude will be at least three polygons - because you don't need to attach it to the hull, while anything you indent has to be at _least_ 8 to have the same shape (not counting the polygon it was indented into). So, when dealing with the shear numbers of greebles you've got here, you should almost always choose extrusions over indents unless an indent really will look better.