http://www.bakdesign.net/tm/tutorial/3dsmax_tutorial.html
this looks easier than the current terrain blending method
(blender would also work) ... just an idea
I know that method, and it's also a good way to create nice looking terrain. But this requires skills in 3dsmax, and it's not done by just making some rounded ground.
I think you can also do it with blender
it supports ASE export and vertex painting
omghax forum username.