Completed grid:
Answers and explanations (with a few gaps, for which see the "quibbles and confusions" later):
Across
1. SORT SOT around R(-ail) Kind of drunk around railhead (4)
4. ILEX I + LEX Current law for Holly? (4)
7. DISME (M DIES)* [_indirect anagram!] About a thousand days in Rome is a tenth for Will (5)
10. CORN UNICORN minus UNI Sinister royal supporter lacking 43 to salt (4)
11. ALLODS L in LOADS* [indirect anagram! ... and the definition seems off] Old sovereigns left in large quantities all over the place (6)
13. ALB substring of BALBOA; "vestment in Panamanian currency" Panamanian currency investment? Quite the opposite (3)
14. CROSSERS C + ROSSERS [but surely it's ROZZERS not ROSSERS] Migrants caught by police officers (7)
16. TOE TOISE minus IS Member once six foot long (in France) is withdrawn (3)
17. CEDAR RACED* Raced around evergreen tree (5)
20. ANELE ELENA* Oil dicky Elena (5)
21. BOARDING->RING GRIN* Grin about embarkation (4)
23. RETIRE RETE around IR Withdraw from network crossing Ireland (6)
25. STEN substring Submachine gun found in east England (4)
26. MEAT ME(-erk)AT Meerkat gutted for food (4)
27. DAG GAD< Gadabout, eccentric in Australia (3)
28. ILIUM ** debtors are topless (t)owers, you see...** Tragically, debtors got burnt here (4)
29. ADD DAD* [indirect anagram!] Say more about father (3)
30. AIDS see 21d See 21D
32. ROTA RA containing OT Papal tribunal where god introduces Old Testament (4)
34. SIENNA (ANNE IS)< Anne is back for earth pigment (6)
35. ERAS E + RAS Important dates for east Ethiopian noble (4)
36. SENDS south->S Southend’s dispatches (5)
38. ALGAL substring Kind of bloom seen amid naval galleons (5)
40. COO substring Executive position held by co-owner (3)
41. AGNUS DEI (GAIN USED)* Gain used to be adjusted for part of mass (5,3)
43. UNI (-p)UNI(-c) Carthaginians, lacking coppers, may be studied here (3)
44. VAPOUR sorry, don't understand wordplay To bluster Japanese e.g. 24 as heard on radio (6)
45. REPS RES with P filling Fabric made from matter with soft filling (4)
46. PEALS homophone of SLEEP* [indirect anagram, kinda] Loud sounds upset sleep, reportedly (5)
47. HEME substring [but how does the definition work?] Ed’s residence is in the Mendips (4)
48. ASKS (KS AS*) [indirect anagram!] Heartless kings as drunk as newts (4)
Down
1. STATESMANSHIP STATES + MAN + SHIP Asserts two vessels show superior diplomatic ability (13)
2. ROBE EBOR.< Ascendent archbishop’s attire (4)
3. TRACING (GTG CAR IN)* Graphic record of GT car in accident (7)
4. INCENSION (NINE ICONS)* Chopping up nine icons for kindling (9)
5. LARBOARD->LARD don't understand the wordplay, sorry Crusader finally departs for historic port (4)
6. ELO EL + O The Spanish zero-rating system (3)
7. DOSA DOOSRA minus [letters of] OR Pancake, delivered by Muralitharan perhaps, lacks alternative (4)
8. MISLEAD (DAMSEL I)* Deviant damsel I deceive (7)
9. ESSENTIAL OILS ESSEN(-e) + (LT AIOLIS)* [_indirect anagram!] Sect out east mixing light sauces for plant extracts (9,4)
10. CLOUT C + LOUT [but I'm not sure how LOUT is "nut ignoring injunction"; I want it to be something with DO or DONT removed, or similar...] Speed nut ignoring injunction is a target (5)
12. DENIM (D MINE)* Material possibly used in tumbledown diamond mine (5)
15. REREDOS (REORDERS-R)* Without right, reorders itself for screen (7)
18. ARRIVAL (VI R in LARA)< Six kings, sheltering in croft perhaps, raised baby (6)
19. REFUGE R + FUGUE* [indirect anagram!] Safe place to receive new arrangement of musical composition (6)
21. READING AIDS (DARING SADIE)* Daring Sadie distributed help for bibliophiles. (7,4)
22. GALENA GALEN + A Greek physician with a mineral ore (6)
24. TEMERAIRE but why? A painted ship seen on current scores (9)
27. DISEASE SEAS covered in DIE Disorder salt covered in mould (7)
29. ARAL SEA AREA containing SAL* &lit [not sure what happened to the T] Area containing salt mixture? (4,3)
31. SEDNA ANDES< Goddess uplifted range of mountains. (5)
33. TOONS cryptic def; Scots "towns" Hamilton or Perth, for example (5)
37. SUPS UP aboard SS Heading northward aboard ship for drinks (4)
39. GERM substring Shoot characters in Danger Mouse (4)
40. CUPBOARDS->CUPS ddef Stores for suit (4)
42. DUE start of DUENNA Initially governess is proper (3)
What has happened to the highlighted lights?
"All the BOARDs did shrink." (Each instance of BOARD in the answers has been replaced by one of the letters of BOARD, or in one case by nothing at all.)
Why?
"Water, water everywhere."
And what caused this unfortunate state of affairs?
The Ancient Mariner has been cursed for killing an albatross. Another conseequence, as we would find by suitable modification of the yellow square, is that "instead of a cross, the ALBATROSS / about my neck was hung." (I've left it unmodified, contrary to the rubric, for the sake of clarity.)
A few other remarks:
The clues and answers contain a good deal of salt and sea and ships. Also, the words "a painted ship" in 24d also appear in the Rime of the Ancient Mariner. (Maybe there are other quotations, but I didn't spot them if so.)
Quibbles and confusions (now including some explanations from OP):
There are several indirect anagrams. Booooo!
11a: surely ALLODS doesn't mean "old sovereigns"? An allod is land that you hold freely; you are maybe sovereign, but the allod isn't. (I did wonder whether maybe there are such things as ALLOBOARDS, but no.) [OP says this was just an error; fair enough.]
14a: surely the cops are ROZZERS, not ROSSERS? [OP tells me ROSSERS is in Chambers, and indeed so it is.]
28a: ow ow ow ow ow. (Maybe I should explain this one for the benefit of anyone who didn't get it, though really you're better off that way. In Marlowe's play Doctor Faustus, Faust gets Mephistopheles to provide him with Helen of Troy as his lover. Seeing her, he exclaims "Was this the face that launched a thousand ships, / And burnt the topless towers of Ilium?". Topless towers would be OWERS, don'tcha know, and owers would be debtors.)
44a: this must be VAPOUR which can mean to bluster, but I don't understand the wordplay. (In comments Jeremy Dover suggests that it has something to do with the band The Vapours, who had a hit called "Turning Japanese". Plausible, but still not clear how it works.) [OP explains that this is another terrible, terrible pun: if they're Turning Japanese then they're ... Japanese Turners.]
47a: wordplay-wise this seems like it should be HEME (substring), but I am entirely at a loss as to why that would be "Ed's residence" (and there are no letters of BOARD to expand, not that that seems like it would help). [OP clarifies that Ed is Edmund Spenser. Duh, should have thought of that.]
5d: sorry, don't understand the wordplay here at all. [OP explains that this is TEMPLAR minus TEMP, though I'm still not quite clear why "finally" = TEMP.]
10d: I guess C is "speed" (which I don't much like, but it's pretty common) but I don't see how to turn "nut ignoring injunction" into LOUT. I guess we want to remove DO or DONT or some legal term from a word indicated by "nut", but I don't see it. [OP explains that this was CLIP ON NUT ("clip" = speed, and I guess "on" is a sort of reverse-cryptic thing) with IN and PN -- in + junction! -- removed; I think "injunction" meaning "take IN and a kind of junction, and remove those letters from random places" is a bit too clever!]
24d: of course I see why TEMERAIRE is "a painted ship", but I don't understand "seen on current scores" at all. [OP explains that it's because Turner's painting is on current twenty-pound notes!]
29d: what happened to the T of "salt"? [OP explains that salt -> sal, so another indirect anagram.]
42d: I really don't like "initially" for "first three letters of"...
For the avoidance of doubt, despite the quibbles above this was a fun solve, and the thematic trickery made me smile when I figured it out.
Thanks to Jeremy Dover for explaining, in comments below, things I'd missed in 10a and 9d, and for a plausible suggestion for part of what's going on in 44a. And thanks to OP for explaining all the rest!
