Thanks! Yes, now my own terrain is set up pretty much like your example, skinwise, and it's a much smoother display now. I've used mipmaps and secondary skins to add texture to the terrains before. I didn't realize that simply adding mipmaps would create the LOD textures for a skin in MED. That's very nice.
The PSP is still giving me a little trouble, though I found I can splt the RGB channels into three parts and paint on each one, then merge them back together. But I only seem to be affecting the blue channel. I'm monkeying around with setting the palette transparency now and I think that should give me the alpha channel.
This is very cool.