I had a chance to play with your code today to try to figure out the weird shadow problem that still exists with the code.

After a few hours I have narrowed the problem down to a few lines of code.  But the problem area is perplexing.

I first looked over the shader code.  It seemed OK. Then I moved onto the generation of the normals, because I came to believe that was in error.  But that too, was OK.  I generated the same exact normal map as you do.

So I added the following bit of code to your LoadContent class right after the creation of the new quadterrain and subsequent texture save to "C:\normalData\test.png"

Viola it worked!  But the question is why?  What is the Content loader doing different with the texture vs. what you did to generate it?  I couldn't come up with an answer, but I need to get back to my code.

Hey cool! It's great you got it working...

..but...

...what the heck? I wonder why it would do that? That makes no sense.

Here's the relevant texture generation code:

Maybe someone with more XNA experience could tell us why the above would have different results on Gorky's graphics card when compared to loading the exact same texture via the content pipeline, after it had been saved using Texture2D.Save?