What I usually do in these situations is place a really big sphere in the areas where I don't want clouds to appear. Then, I hide the sphere from render and set the cloud material to fade with objects (I don't remember the exact name of the slider and I can't check now). So, in the area where the sphere is, there are no clouds and the sphere is also not visible because it's hidden from render. This is a very easy, quick and effective method.

But in Vue7 there's possibly another way. I never tried it but it probably works. In the new world function editor you can probably set the clouds to dissipate as a function of the distance from camera.