That is a normal map issue. Make sure your model has a normal map texture assigned, and also make sure the tangents have been generated for it. You can check that easily by opening the .mesh file in notepad and checking out the Tangent entries under vertices. If they happen to be all zeroes, then you don't have tangents generated. In XSI you do that by selecting your model, then going Property->Tangent.

Tangents are used for lighting purposes. Specifically to allow the smooth light/shadow transition across the surface of a model, instead of polygon jumping you get when there are no tangents specified.

I had the exact same issue when I tried to import my first model, I'm quite sure that's the problem you're having.

Sure thing. You do that by using null objects in XSI (Primitive->Null). There are some naming conventions to be followed in order for the converter to recognize them though:

First add a null object called "rootpoint"

Then add nulls for "Center", "Above" and "Aura", after that you can add nulls for "Exhaust" and weapons, called "Weapon-0", "Weapon-1" etc.

However, since the converter strips the first five characters from the name of a null object, you have to name them so that there are any five characters prefixed to the name. So instead of "Weapon-0" you would name the null "aaaaaWeapon-0" or like I do "000-Weapon-0", "001-Weapon-0" etc. (only four characters because XSI automatically adds a "_" in front of a null name which begins with a number). This is also useful for having multiple nulls named the same (for example multiple hardpoints for the same weapon, or multiple exhaust points) since XSI does not allow two objects to have the same name.

Once you are done adding and naming the nulls, you have to open the Explorer (Alt-8) and drag all the nulls to the "rootpoint" null. Select them all along with your model, export and convert. That's that.

No problem, glad to have helped.