Yup, still totally stuck!
In an attempt to get a few things done I will try to regroup, focus on a few things, simplify and cut corners everywhere and reuse existing code and features from whatever resources I can find.
Terrain is very dependent on texturing, not just because of how it will end up looking, but because the kind of terrain you have determines what you can do with texturing, thus forming a vicious circle.
And the tile based texture atlas terrain does not mix well with what I want to do with the terrain. Plus is it ugly.
To make up for lost time and to make implementing terrain easier I am going with a much more streamlined vertex structure: as easy as it gets, with the minimum possible vertices and an index list. This in contrast to the more complex terrain I had implemented. Stretching a single texture (or multiple large ones) over such a simple mesh will end up looking bad any time you view it from even normal distances. Only when viewing it from far will it look not blurry.
So I learned texture splatting:
The idea is to take the stretched out blurry texture and splat on top of it a few other highly tiled textures. This is done on the fly by a pixel shader. The only input this shader takes is a special bitmap that gives information about where and how much to splat and the textures that are going to be blended together. In the above video both the heightmap and the splatter-alpha map are only 256x256, while the textured that are used for detail are higher resolution.
In theory this is a simple process and I have fully understood the shader. In practice things are far from smooth. Irrlicht has a 4 texture limit. I think you can get it to support 8 somehow, probably by recompiling. So one texture is the alpha map, and 3 textures used for detail. There is no room for the master stretched out terrain texture, so the above video uses only the detail textures without a master texture. Great, more obstacles!
Also, because I am using a custom shader, built in lighting does not work, so I'll have to merge my terrain splatting shader with my lighting shader.
In the spirit of code reuse, I have used the built in terrain class from Irrlicht, rather than simply my vertex setup model and implement terrain LOD switching. While not really visible in the video, the terrain switches dynamically in complexity based on distance. And it is a good thing that you can't notice that it does this. A slight modification was done to the terrain behavior from that class in order to not apply the default detail mapping but use a shader.
I'll use that class as a learning tool, maybe even adopt parts of it into my code.