The Dagger: Look at the picture I linked. Light in PCS2 comes from the top/front of the model; that light is coming from the bottom/back, which means the normals are wrong on all the polies.
FreeSpaceFreak: Vertex normals determine how lighting is calculated. Which way the poly faces is based on which vertices are defined first in the poly; IIRC, if they're listed counterclockwise facing the camera, the poly is facing the camera and is rendered. If they're listed clockwise facing the camera, the poly is "backwards" and isn't rendered if backface culling is on. I remember this from when I tried to get into OpenGL.
Either the vertex normals, or the order of the verts listed in each polygon, needs to be flipped- the only "flip normals" functions that I see do both of these.
I'm simply describing what I see in PCS2 and the only thing I think could be happening to the normals. Could it be something else? I admit I'm not a master modeler so I could easily be missing something.
[EDIT] I'm convinced at this point that it's not a layer 8 or ID-ten-T error. I made a cube in Wings3D, mapped it (PCS2 doesn't like unmapped meshes), and exported it to DAE. PCS2 tried to open it and it was inside out, and the lighting was inverted. I flipped the polies using Wings3D's "invert" function and exported again, and the result was similar to the pic I posted above; right-side-out model, inverted lighting. There may be problems with my mesh but they're not causing this particular error.