I use similar method like Lingrif. Terragen + F.E.O. plugin (FEO =For export only). With this plugin you can export Terragen terrain as bmp height map. Terragen itself can export terrains as lightwave .lwo objects. They can be used in Vue dEsprit, but its too many polygons and you cant use standard Vue tools for terrain editing. Btw, I wrote an article about that for Renderosity magazine (issue 6 I guess)