I understand that when elevated (i.e. on a building), you can only see people on the ground if you are on the very edge of the building.

Now, I gather from a thread on here somewhere that you can also stand on the items on the roofs, such as the chimmneys and water cooler. I'm thinking of the DC outdoors map, now - if a character is stood on the water cooler i.e. 2 levels of elevation, I assume the sight down from water cooler to the roof works the same as roof to floor. However, can a character on the water cooler see people on the floor? It seems silly to say that when he is so elevated and only one square away from the edge of the building he can't see a character 7 or 8 squares away from the building.

This sounds confusing, but hopefully you get what i mean. Imagine a character with 10 range on a chimney or water cooler that is one square from edge of roof, and see how stupid it seems that they can't see someone 6 squares away from building. If you can see them - what are the precise rules?

Thanks for any help you can give me.

No, there is no such thing as "elevated" elevated terrain. You can stand on them, but you cannot see down to the ground. Rules for elevated combat say that you can ranged attack down so long as teh only square of blocking terrain the LOF passes through is the one you are in. If you are standing on one of the water coolers etc, your LOF would not only pass through its square, but then through the blocking line of the building itself. Therefore it cannot be done.