I would respecfully suggest model planes to counter all the probs you are facing as then you can control every element of the planes behaviour with precision, as for stiched terrains, there is a code than can sticht together terrains with relative ease in the AUMs provided by an expert user here, great little prog but I have personally never used the function so cant help there...

morph is good for a lot of objects but so is ent_create and destroy...

What I would suggest is to manufacture model terrains if you are not going to have your player walk the terrains, then you can set the edges with the right amount of vertices while lowering the 'feature' parts of the model terrain so that any area with a flat aspect could be just one quad and the mountainouse features taking up the necessary poly's to adequatly describe inherent apearances then morph as the vehicle gets close enough to notice features.

It would save you a tremendouse amount of fps as models do not carry the inbuilt functions that come with terrain use but can be made to appear that they do with mips, etc or alternatly, set your terrain non dynamic to save heavy calls if that can be done.

Fog can be made with alpha's but again they carry a lot of overheads but it is a technique I have used successfully in the past and with great realism, its just that from the air, you would get a greater camera view than if you were grounded and thusly more engine resources used just to get the scene seen right.

Check out Google Maps for far terrain loooks too, they do a great job of using lods...
Edit
I forgot to mention, to save the jitters from distance to origin problems, have your players etc stationary and move the 'whole world' to keep all objects close to the origin...That is, your world and all its elements do the moving...