yes, a third texture would be possible! the limit is how many texture stages the hardware supports in one pass and most current cards support 4. for more textures you would have to do multipass rendering which is slow because it's like rendering the terrain several times...

the terrain gets lit from the sun direction!

to reduce your problems with the gouraud shading artifacts, try to adjust the sun vector and maybe instead of <veclight> try to use arbitrary ambient values like vertexShaderConstant[19]=(0.5f,0.5f,0.5f,0.0f);. <veclight> is the brightness of the shadowmap below the entity and actually it doesn't make much sense to use that for terrains.

but i don't know where the seams from the stitching come from. i never stitch terrains. i think once quadtrees are implemented, terrain stitching won't be necessary anymore for improving performance...