I sent you pm for terrain and modeling. I also added a few things here for terrain that I did not put in your pm. But there is another pm regarding the modelling issue.
Reference for anyone else who comes across this post.
Using IceX. You do not need a heightmap or the skins as it automatically makes your terrain in model geometry and assembles it for you in a wmp file! Open the file and you will see what you just made already to go in WED. Just add your buildings and trees etc. There is a video tutorial on his website.
Video Tutorial for IceX. This will explain how it works.
Working from a hmp file...
You will need this script to use with your terrain. This one is for Lite-C.
Script for Terrain You will see 4 texture files listed in this script. Make sure the names match your texture files. This is for use with an EarthSculptor terrain. There is a free version of EarthSculptor you can use that exports 512x512. There are instructions right there at the top of the terrain script that show you how to use EarthSculptor and the script. Do not forget to select your terrain geometry in WED and go to behaviours and select a terrain behaviour! That way the textures will be assigned for it. Then you should be able to run WED.
Other methods and other Terrain editors.
Using Terragen -
http://www.coniserver.net/wiki/index.php/How_to_create_terrains_using_TerragenUsing L3DT -
http://www.coniserver.net/wiki/index.php/How_to_create_terrains_using_L3DTNote. When using EarthSculptor it exported to 513x513 so I had to resize the texture to 512. So I would watch the export sizes of your files. They need to be in powers of 2. 128 256 512 1024 2048 etc.
Also remember to save EarthSculptor terrain as bmp not hmp. MED does not like that hmp file. In MED File --> Import --> Terrain from image --> select bmp file.
If using IceX remember to save it as the native IceX format before you export. The native file is .icx. If you wish to go back into IceX to edit or change from there I do not believe you can if you have not saved it as the native file. Once you export you are done as far as that terrain and IceX are concerned.