If I got you right, you only want some fog on the ground and no distance fog.
I would create a model with a couple of kinda random faces which are all textured with al lot of transparency, probably some noise and the color of your fog.
You could then transform the vertices a little and place it in your level at the positions you want the fog to be.
Slin, I was considering your idea as well, and was wondering it it was that simple, to just create a box in WED and set its transparancy to create fog. I can't figure out how to adjust the transparacies on the block, I checked its properties, but the option isn't there. I can't figure out how to turn the block white either (or did you mean to find a texure the color of the fog I want and apply it to the block?)...