This paper reports progress on the simulation of metallic clusters embedded in a quantum fluid matrix such as 4 He. In previous work we have reported progress developing a real-space density functional method. The core of the method is a diffusion algorithm that extracts the low-lying eigenfunctions of the Kohn-Sham Hamiltonian by propagating the wave functions (which are represented on a real-space grid) in imaginary time. Due to the diffusion character of the kinetic energy operator in imaginary time, algorithms developed so far are at most fourth order in the time-step. The first part of this paper discusses further progress, in particular we show that for a grid based algorithm, imaginary time propagation of any even order can be devised on the basis of multi-product splitting. The new propagation method is particularly suited for modern parallel computing environments. The second part of this paper addresses a yet unsolved problem, namely a consistent description of the interaction between helium atoms and a metallic cluster that can bridge the whole range from a single atom to a metal. Using a combination of DFT calculations to determine the response of the valence electrons, and phenomenological acounts of Pauli repulsion and short-ranged correlations that are poorly described in DFT, we show how such an interaction can be derived.