This で is a simple connector. You may know te-form can be a reason marker, but this で is nothing more than simple and. The sentence basically says Shimamura only saw a few shacks, snow and darkness when he looked out of the window. At least in this case, I think the translator could have translated this sentence naturally without splitting it into two. But when to split a sentence is basically at the discretion of each translator, and there are times splitting a sentence can be a reasonable option. Japanese sentences can be incredibly long if multiple で and だが/けれど are used.
Original Answer:
The full context (from 雪国 by 川端康成):
向側の座席から娘が立って来て、島村の前のガラス窓を落とした。雪の冷気が流れ込んだ。娘は窓いっぱいに乗り出して、遠くへ叫ぶように、
「駅長さあん、駅長さあん。」
明りをさげてゆっくり雪を踏んで来た男は、襟巻で鼻の上まで包み、耳に帽子の毛皮を垂れていた。
もうそんな寒さかと島村は外を眺めると、鉄道の官舎らしいバラックが山裾に寒々と散らばっているだけで、雪の色はそこまで行かぬうちに闇に呑まれていた。
だけ means "only", and this で is the continuative form (or te-form) of the copula だ. In this context, it means all he could saw was バラック's (or shacks). Similar examples:
- 見ているだけです。 I'm just watching.
- 聞いただけで、信じてはいない。 I only heard about it, I don't believe it.
- この部屋には椅子があるだけで、他には何もない。 In this room, there is only a chair, nothing else.
Please don't clip a sentence unless you absolutely know what you're doing.
It's hard to explain the true meaning of this だけで without the part you clipped.
