They don't, so assuming there's a big box around the level, cordon is on, or NODRAW brushes are properly placed behind them, it compiles. If the NODRAW brushes aren't present, it ends up like a giant box. VALVe used a skybox in d2_coast_12, the displacements just block stuff with occluders and hints.
Water should work if it goes thru a displacement map but you might experience some issues with swap buffers.