Making a lod model is VERY easy. The following things are needed to know:
1.Your model must be misc_gamemodel otherwise it will never change
2. If there is modelname_1.md3 in the same folder it will load it automatically, you can also have _2 if you need an extra lod step. This is all that is needed to enable lod model.
3. The lod distance can be changed by player (r_lodscale iirc)
4. Players can force it to always load low detail model for them, most competition guys have it on lowest (r_lodbias iirc)
5. Players will notice the dynamic shadows changing on the model when the lod changes, this makes the model change obvious.
6. After reading 3, 4 and 5 you know to make the differences small if you add lod models.

