Great work on the rest of the models! They look fantastic!
And you're pretty spot on about the PBR and traditional differences. A lot of the shadow details usually seen in PBR engines are rendered in real-time. They also have access to various other input maps such as metallic, roughness, and ambient occlusion (shadows) which help build on the lack of detail in the color maps.
Because Skyrim relies mainly on diffuse, normal and specular (shinyness) maps, we're required to get as much detail into the diffuse as possible.
The Questions and Answers
All of your questions kind of come down to vertex normals (or face normals) which is a whole topic on itself. There's an incredible amount of information out there about it and I couldn't hope to explain it properly in one post. If you want to do some further reading into what they are and how vertex normals work, I'll add some links explaining it down below.
Skyrim can smooth faces in-game depending on how you've shaded your model in Blender.
Whatever you have in Blender will export into Skyrim in a similar manner, so the pinching will also appear in-game.
Once texturing and normal maps are applied to the model, the pinching will be less visible, although it will still be present.
Advice on why/how the pinching happens will be explained at the bottom of the thread, as it can be fairly technical, so as not to clutter up the rest of this stuff.
In other programs such as 3DS Max, they have tools such as Smoothing Groups (more on these in my vertex normal explanation), but in Blender, we don't have the Smoothing Group functionality. Instead, we have an alternative method, called Edge Splitting. What this does is it separates the edges, so they're not actually connected to each other.
The easiest way to keep your model organised is through an Edge Split modifier, and marking your Edge Splits. If you go into your modifier panel (little wrench icon), you will find a modifier called Edge Split. Make sure you have the correct object selected before selecting the modifier.
Once you select it, your model will most likely look pretty weird now. This isn't a problem, because the default settings are causing Blender to edge split and faces that are on angles greater than 30 degrees. While edge angles is a totally valid way to organise your edge splits, a more precise and custom method can be found by unticking the 'Edge Angle' box in your modifier.
This turns off the auto-edge splitting, however, now your model is back to it's original state. Now we can go back into Edit Mode, and using the edge selection tools, select the edges we want to be a hard edge. I made an example below of where I would cause edge splits:
Going into our left toolbar (still in edit mode) in the UVs/Shading tab, there is an edge options for smooth and sharp.
If we click on 'sharp', the edges we have selected will now be edge split (thanks to the modifier we added earlier). The edges we have marked as sharp appear as a blue/aqua color by default in edit mode. This should also remove all of the shading errors you are experiencing. Below is my final result:
This method can be applied all over your models where ever you think a sharp edge would be more appropriate, while still maintaining that smooth shading across the rest of your model. Another example below of a before/after:
Now, if you apply this modifier, then go into edit mode, you will find that where you placed your edge splits, you now have two separated edges. This is why I highly suggest keeping a backup of your working files before applying the modifier (or by copying the model to another layer for exporting). Working with an edge split model can be confusing, hence why we keep it confined to a modifier for as much of the process as we can.
The Technical Stuff
I'm not going to go into details about vertex normals, but I'll explain the reason all models look funny at times when set to smooth. I'll leave links for further reading if this interests you further for you to delve into if you like.
The pinching occurs because when you are shading the entire model as 'smooth', the individual vertex normals get averaged over the entire model, trying to make it all appear smooth. If you had more vertices around the poorly shaded areas, the averaged vertex normals would appear smoother and cleaner. Because we are aiming for low poly models however, we tackle this issue with Edge Splitting (or Smoothing Groups) instead of adding in more unnecessary geometry. If you took a generic cube for example, and made it smooth, it looks terrible, as you can see below:
But if you were to add more geometry (but not change the shape of it at all), the vertex normals, when they get averaged, would appear a lot better and smooth around the edges instead of the entire face:
That's my short explanation on is, but there's links below if you want to learn more:
The Polycount wiki has a pretty good coverage of vertex normals and how they work here. There's also a section dedicated to face weighted normals which are starting to become a more common technique in newer games such as Star Citizen and Alien: Isolation. Keep in mind that although people are only starting to use custom normals to their full potential, the ability to modify vertex normals have been around for a relatively long time, and as such, we can implement custom face weighted normals into our Skyrim models. I have started using this technique lately with an addon, and I know a few members in the Iliac Bay team have also started to look into the technique. If you wish to go into more detail and add these techniques to your models, I'm planning on writing up a tutorial on it at some point as to how they work and how we can use them, although that will have to be once I'm back from my holiday.
I might have some time this weekend to write up a tutorial about texturing in Photoshop, although I am away from my PC for around 11 days after Tuesday. If this is the case, depending on your free time and how you're progressing, just post in this thread when you're ready to move on and I will see if I can organise another Beyond Skyrim member while I'm gone to walk you through any texturing questions you might have, or walk you through how the .nif exporter works and getting stuff in game depending on how you're getting along with it. Once I'm back home I'll be jumping back on and ready to walk you through where ever you are up to, or if you've got some models in-game, we can go into more depth about improving techniques. Once your models are all textured and you can get them in-game with collisions, we can start looking into getting you added to our team repositories so you can merge your models with the project. That way level designers can start playing around with them and get ready to put them in Hammerfell.