The GM mode in-game currently does not have any large maps and it's difficult creating larger scale battlefields, dungeons or cities as a result. There's people on the Steam workshop creating bigger maps, so there's always that option. Or you could download the D2 engine and create a map from scratch just as you like it. Apparently the editor will also allow you to place down a proper fog of war.
I haven't dabbled in any of it and am currently only sticking with the actual GM mode and the constraints it poses, so I can't comment on the rest of the options.
A semi-solution I'm using at the moment is to hide things from players by placing a group of characters into an encounter and deactivating it. This makes them invisible to the players (but also, annoyingly, makes them into invisible walls, so you can not place on in a doorway and expect players to be able and walk through it). When the adventurers arrive into the room, you can activate the encounter, revealing the hidden characters. It's a workaround for the fog of war, although it does create a bit more work for the GM and, like I've mentioned, comes with its own downsides.
I would love a fog of war switch in GM mode.