The Blue light coming from the HDR/Tif map flooding the scene with blue light, 360 degrees, well spherical really. So lowering the saturation lowers the effect of the coloured light map hence lowering the colour in the scene
and also the rest of the colors, since the blue is a “layer” covering everything
yes it does generally again depending on the map used for the light
The shadowing, in the case of UE2 is Ambient Occlusion where we have a separate colour channel for that.
You can use HDR in HDR format but you will first need to convert it in to a TIf format via the built in Converter. Or purchase already formatted sets from the store.
The converter is easy to use. open it, browse to the HDR, selected, convert it. Then in the UE2 parameters go to the colour channel, Browse to the converted map and select.
One thing you have to remember the lighting will be as good as the map and some maps are bad.