At the moment I'm using this as the basis for my OVEP work. I'm adding ambient aperture lighting (for self-shadowing) and regular parallax mapping (for basic relief detail) and using the awesome blending system already in place. If Zeroed makes any changes, I'll probably incorporate them into the OVEP version.
Also, @Chainsaw: I made a few adjustments to how some bits of the textures are handled, if you have the time I could use a bit of help getting everything updated to the new format. Notably the blue channel of the normal map has been completely repurposed and reconstructed from the red and green channels.
This sounds good, but there are some problems that you should be aware of - I initially thought about doing this, and instead of using the alpha channel for the mask information, putting it in the blue channel. The game unfortunately re-uses the landscape textures for non-landscape objects, such as caves etc. So you'd end up having to:
1) change all of the lighting shaders to reconstruct the normal map from red and green channel; or
2) (more feasible) duplicate some of the textures to be used on the non-terrain objects. Chainsaw looked in to doing this and said that the texture memory increase was significant. Additionally, it means changing who-knows-how-many NIFs, although it's probably possible to use a python script to automate this to some extent.
Also, I don't know if you're relying on having a view vector for other improvements to the terrain (such as parallax mapping). It unfortunately isn't there (I tried that already

) . Although ambient aperture lighting should work, since by my reading of the ATI paper, it doesn't require one (might be wrong there though). I looked at doing this myself a while ago, but never got round to generating the textures required.