Select your mod on the first tab in Oscape, then press the "Fill" button in the bottom right. After that, select your worldspace from the drop down menu.
For the error during resolution, just select a lower resolution till it works without errors. I think it has something to do with the complexity of the mesh it's trying to generate at that point. I guess you could also try smoothing your heightmap out in whatever software you use to make it.
Yeah I just ended up manually renaming the original RAW thing it makes to my worldspace.
As for the error I think it may be because on of my cells got all corrupt again, so there is a bunch of very tall spikes that I think is messing up it's lower quality LOD stuff. I did however install what files oscape made and currently have visible LOD in my land. It's all messed up and the colors are off and all that crap, but I got it visible at least. I'll smooth the corrupt cell, save and take the time to see if i can now make it generate legit, functional LOD.

EDIT: I fixed the distorted cell, and tried again, and I get the same error. It generates at 3 levels depending on what your setting was. If you start with a max resolution of 650000 it does 650000, 325000 then 162500. I get the error while saving the UI tile for 162500, and it says "The current tile contains too much triangles." Then Oscape stops generating stuff. It doesn't crash, it simply stops generating. I can install what I have generated, but I dont get the rest of the stuff.
Here is a little screenshot of a region generated in the CK
NOTE: this is all generated, nothing was done by hand.
http://i.imgur.com/nQiGn.jpg
I'm also trying to now figure out the region generator and all my stuff looks like crap! Can you help me? How many objects do you use (roughly), and how did you set up the parent/child stuff? My stuff is more or less in rows (Offset by a bit sometimes) but by no means looks natural...