Maybe, the following comparison of low and high grafics settings
helps to get an idea how they did the blending?

What strucks me most is the shape of the blended sand.

http://puppenheim.org/PrinceOfPersia86.jpg
http://puppenheim.org/PrinceOfPersia89.jpg

http://www.puppenheim.org/
http://www.wuerfels-welt.de
Old Game Tutorial: http://www.puppenheim.org/MITutorial.zip
Free Game Editor: http://puppenheim.org/AlienalsWeihnachtsmann.zip
http://www.puppenheim.org/blender_starting_main_settings.txt