The explosion of a fireball only rolls out as far as the nearest wall, and a stinking cloud also stays within limits. So do effects of projectiles under or over creatures, like grease. Why? Aren't those just BAMs played by the engine? When I make a BAM of my own and use opcode 215, Play Special Effect, to make it appear at a target point, and the image is large enough, it goes over the nearby walls and castle towers - and then not all, but some. Characters can walk over this image and under it, if they go north, as if behind a curtain. In short, it's plastered over the screen, not laid over the terrain. This happens whether or not "Not covered by wall" is checked in the properties of the VVC file. This is most obvious with large images, but, in principle, image size shouldn't matter. If a small image was close enough to a structure, the same would be noticeable.
On the other hand, as I said, spell effects and big creatures like giants, who are also BAMs, walk near and by towers and obscure them without landscape features sticking out through them.