Sorry, I refer to the vertical axis as the Z axis - I'll refer to it as Y from here on in

Okay, are you rotating around the X first, then the Y? If you do it the other way around, everything will be screwed (rotation is non-commutative remember
.
As for effects - I'm 99% sure that they render okay through a camera with orthogonal projection, but I may be wrong - I'm far too poor to afford a copy of Max unfortunately.
They definately require a camera though - the 'user' view won't work.
If you're rendering sprites, don't forget to turn off anti-aliasing-against-background.
-matt
P.S. re Jim Adams' sig: Isn't the Light Befallen long dead?