Is it recommended to stay away from making too many active objects? I am trying to make a day to night animation system with moving shadows and the like, is using active objects the only way? I wish there was some extension that allowed me to use some formulas to automatically draw shadows on objects instead of me having to make them.
You should definitely use as few actives as possible. You can achieve something similar using an effect like this example by Andos:
http://www.clickteam.com/epicenter/ubbthreads.php?ubb=showflat&Number=194709
But other than that, or some other complex HWA shader effects, I don't know of a feasible way to accomplish dynamic shadows.