Sensible is really a matter of personal taste Andreas

My current build's worldmap has 32 terrain tiles, at max size and
max divisions working smoothly. I do strongly use LOD in my maps,
including for terrain though.
On top of the terrain are (depending on location) 4-8 command blocks
that pass on weather or condition information to affect speed (and
cloud movement). Then there's trees, cities, etc.
As Squat brought up, it's a great idea to have at a certain point whole
*groups* of objects- trees, houses, etc, drop down to a simple alpha
mapped 2-10 poly plane or cube.
Forests can then look truely epic in size, without being proportionately
epic resource hogs. Cities can tower in the distance- their tops brushing
the clouds- without system specs needing to be the same...

The engine *is* solid. Just as much as anything else out there- and honestly
about as well, if not better documented for it's age (although that's always
been a pet peeve with me-engine documentation).
So to answer your question- I use # 2.
Often though, I'll create my terrain, and if having trouble with alignment, I'll export
the heighmaps, and bring them into Gimp, photoshop or paint, and adjust
the edges manually there by copy pasting the tiles into one large, matching edges
and then re-exporting.
It's fast, it's fairly painless, and it looks good, works good- and it doesn't make me
want to throw my computer through the window.
My 2cents. Hope it helps
