Cypher, don't worry, its not impossible. A local function is a function which executes LOCALLY, meaning, local to the client which called the function. When you executed the function in the debug window, it executed locally for you. This is why you saw the effects, and no one else on your server did.
In order to have the fog appear uniformly for all players, each client needs to execute the function. This might be a good place to start: http://community.bistudio.com/wiki/Multiplayer_scripting
Since setFog is a local function, the fog appearing only for you IS the correct behavior. Once again, I do not think this is the proper venue to ask this question (though I realize you thought at first the function was misbehaving). You would get more help, and quicker, if you ask this question on one of the many editing communities for this game. Good luck