OK, guys.

I successfully imported an heightmap (created using a simple image editor (GIMP)) into MED. My next step is how to place the textures into the proper places (grass for grassy areas, sand for cliffs, brown colored rocky textures for cliffs and mountains, etc.) and import them into MED.

Would anyone advise to better using terrain creating software like l3DT or Terragen.

For that you need a Terrain-Shader and atleast the Commercial Licence.
GS offers its own Shader, which blends between your Textures according to your blendmap.
There are also some other Terrain-Shaders around this FOrum, try to search for it!
about your second question: as far as i know, you can only export a hightmap out of external software such as Terragen or as i using it EarthSculpur (ES) and import it into MED.
In ES you can also export the mesh with your desired vertices number, but that works only for models not terrain as its not a regular grid.

no Commercial needed for the terraintex.fx which is a fixed function effect. it utilizes alpha blending of in theory unlimited textures, but textures can't be painted in MED. you can export .hmp in this format by a free terrain editor called PnP Terrain Editor. my editor also includes support for this, and features terrain deformation and texture painting (but currently can't save modified textures into .hmp, only as separate files, but it's only a few clicks in MED afterwards, or can be loaded runtime easily). if you need realistic terrains, in my opinion the best to use L3DT.

as I remember GED offers terrain editing utilities including deformation and taxture painting, but number of textures limited. but I've always got a crash when used GED...