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All well and good, but there were still a few loose ends after that encounter.
1. Should there be less of a chance for encounters due to preparations such as hiding the fire? Or more of a chance for lack of such preparations? I think the latter, so on the d20 roll for static encounters while camping, figure -3 in flat ground, -2 in hills/mountains, or -1 in forest if the party is making visible smoke by day or fire by night, unless they take pains to hide it.
2. Should shouts be enough to wake the party in one round? Watches and waking are not really well treated in any of the old-school material I know of (I'm sure Wilderness Survival Guide from AD&D covers this but I am not familiar with it). In retroactive continuity, we can say that the holy influence from the lammasu spire made people miraculously alert to the shouting. But normally, I would say that physical kicking or shaking will also definitely wake people up, and any other alarm will wake people up if they make a Mind save (Spells if you're using that system). An unusual alarm device will give anywhere from +2 to +4 on that save.
3. All this argues for more people on watch, so that one or two can handle waking duty while the rest defend against attack. My party, maybe working off procedures from other games, posted only one watch person and disallowed the spellcasters from taking watch because they need to get sleep to recover spells.
But realistically, nights are 12 hours long (my world is flat so there's no procession of the sun; on a round planet with axial seasons, things get more complicated) and you only need to sleep 8 hours. With this in mind, it's not just a good idea to have watches consist of 1/3 of the party strength, it's actually more realistic, because what else are people going to do for those 4 hours?
In fact, before electric lighting, it was culturally accepted to have a period of wakefulness in the middle of the night. So even taking middle watch is an acceptable way to fit 8 hours of wakefulness into 12 hours of night. Even if spellcasters do need that sleep to be uninterrupted if they are to regain spells, they can still take first or (preferably) last watch.
4. All the same, this makes night monsters much more dangerous; they effectively get a couple of rounds even if you're not surprised and then you have to fight them in your PJ's.
I'm curious how the rest of you handle this kind of situation, given that it's not well described in any of the core rulebooks I know.