I am sorry to disappoint you but it's not.
But if it will make you feel better, it's not my theory either. My theory was that "Flaots" is a pointer to a base owner (In a 3D world, any attached Actor would move relatively to the Base, like say a Weapon... the Player in a FPS game will movedynamically, but the weapon will always move relative to the Player's position since the Player is a base).
In this case, the slave actors would have been the shadows and engine effects...
Alas, I was wrong. What "FLOATS" does will AMAZE you.
It is actually responsible for cloaking. What I mean is, anything checked with "FLOATS" will be "visible" when cloaked.
A little explanation now...
To use my base example, any base owner has FLOATS checked and shadows unchecked. This means that when it is cloaked it will have the whirly effect, but it will STILL BE VISIBLE (well... as much as it can since it's cloaked

), but the shadow is gone. If you remove this flag on a base actor, then that actor will be COMPLETELY invisible and won't be drawn at all. What I mean is, there will be NO whirly thing and there will be NO DETECTION, meaning that even if you bring an observer, it will still not show up. Howto test if I'm right ? Enable it on a HT shadow (the blue echoed shadow thing) or on Scout Engines and be amazed that you see them even if the unit is cloaked.
Current name: Floats (?)
Suggested name: Don't hide if cloaked
Explanation: Will hide the unit from the map completely if unchecked (even by detectors), or will make it visible when cloaked
... don't ask how I found out what it does... let's just say I am a genius, you guys make me a statue and we'll move on from there

Come to think of it, what you said (about headers, iscript and death inits) is done by "USE FULL ISCRIPT" I think (but I am not sure).
Oh my... I am finding out so many unknowns... BK will hate me lol... (or envy me

)
Note: this applies to units though... and I am not sure about burrowing, but if someone is willing to continue the research, I'll give him a cookie

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I've been working on Ultimate Doom and I think there is a high chance this guy could be right. I can't find any other explanation as to why shadows disappear because we all know they use the followmaingraphic command, not the __2b or __2c command which I proposed as playfram-when-not-cloaked commands. What that could mean is that __2b and __2c have entirely different meanings, perhaps they've got nothing to do with cloaking at all. Maybe they've got something to do with a LO file. I'm convinced that TheNomad is right about what floats does. The testing that TheNomad has done does confirm it.
Perhaps the way he's written it has confused the meaning. It is true if you bring an observer the graphic won't be drawn on a cloaked unit that has this setting checked, just like the Wraith's engine graphics aren't drawn on the cloaked wraith, but you'll of course still be able to select the unit.
So I think he's right and I thought you should know.