Yeah, it is a pretty realistic effect. I'm going to work on specular lighting in the shaders soon, I'm hoping to get a moonlight effect at night.

If you could post a screenshot of the shading that you spoke of that'd be great. I never thought about it and I wonder how it'd look. I know that with sharper edges, or more steep terrain, I've noticed less realistic shadows, does it help in those situations?

That does look pretty slick, I really need to work on something like that. When my terrain becomes steep it is easy to see the edges, which takes away from the reality of it.

for texture splatting i used an rgb-map. each channel holds 8 bit for every pixel. with that information i'm able to get a percentage for each pixel and each texture (max: 4 textures). with a 2d graphics application you are able to draw the image for each channel.