As you can see, the wheel doesn't look that good with all the edges set to soft. The strange shadows visible on the mesh will have an adverse effect on the quality of final lighting with normal maps. Here are some simple rules that I use when setting up normals:
a. All border edges count as hard edges (not a rule, but a fact to be remembered)
b. For curved continuous surfaces, set the edges as soft (2 and 3 in the image)
c. For angles that have a concave shape, use hard edge (4)
d. For angles that are close to 90o use either soft edge if the edge is facing the camera (5), or hard edge if it is not visible (6)
The last rule is good for objects that do not rotate in the scene. As always, these rules can be broken as long as the final result is good!
Using the above rules, here is how the wheel looks. The continuous edges are hard and the dotted line ones are soft. This view mode can be activated by Shift & right-clicking on the object and selecting Soften/Harden Edge > Toggle Soft Edge Display.
I recommend setting up the normals before optimising the geometry. This way you can take shading into account when the polygon reduction is done. As the hard/soft edge setting in reversible, it is easier to change edges from hard to soft, or vice-versa, to reduce the entire mesh with all the edges set to hard only, to realise that once the normals are set, some areas require extra polygons.
Next, some images that show the way the normals are set on the car's body:
If the high-res geometry has intersections, it is preferable that the in-game version has none. Partially occluded polygons will most likely lead to artefacts in the game's engine. Topology has to be redone in certain areas, and fully occluded faces can be deleted to avoid rendering artefacts.
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