I made a section of cave that has a hole in it and it drops off into a big cavern filled with water. I pulled it up in game to see what it looks like and when i fall down about half way into the cavern part it teleports me back to the entrance.

http://img30.imageshack.us/img30/5111/mwcaveprob.jpg

The "X" is location were i get teleported back to the entrance when i'm falling.

Any ideas?

You're not running into a height limit, you're running into a falling limit. When the player (or other actors, I think) fall for long enough, the engine teleports them up to a hopefully safe place, so they won't fall forever (they'd eventually hit the bottom limit, which would probably result in Undefined Behavior).

To fix it, just make it so they can't fall so far in a shot, add something they'll land on every 10/20 feet (small ridges they can't stand on, but will land on enough to reset the falling time counter).

Thank you!
I put a a steep "slide" at the mouth of the hole at the top of the cave. Ill just slap an alpha texture on it so I won't be seen.

If the cavern isn't too deep, you can put some statics at the bottom of the pool. This seems to greatly help with this behavior.

Of course, I was running into a swimming limit - if I made pools too deep, you would get teleported as you swam down. I'm not sure I've actually run into the falling limit...

Might be worth a try, though.

Another idea would be to put invisible activators in the cavern every so often, and script them so that they disable immediately upon collision. The action will occur in a single frame, so you shouldn't even notice hitting them - as long as you don't place them so far apart that the player takes damage.

I'm using a similar method to implement a trap ceiling door in my mod. (I was running into the engine wanting to place the player on the floor immediately, rather than falling, so I have the player emerge on a hidden activator that does precisely this.)

This brings a question to my mind... I once tried to make a trap that teleported the PC to a very high collision wall in an exterior cell, and then disabled the wall. Each time I tested it, either I would find myself (as the PC) suddenly standing on the ground, or gently falling to the ground as though on a slight incline.

I tried to use the "fall" function, and had no better results, although we all know that it works quite well with tarheil for the icarian flight thing. Has anyone used the function in such a manner with any success?

Falling/advancing past the center point of the lowest static in an interior cell will result in the player being placed back at the entrance to the interior. To remedy this, just be sure to place a static (say a rock mesh) waaaay below your cave mesh. This will allow you to descend without the pesky auto-teleport .