So, using TESannwyn and learning about engine height limits, I discovered that the red mountain could be 1.6 times higher then it currently is.
Mutiplying the landscape height by 1.6 everywhere results in these images:
Bamora Before: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20A2.jpg
Balmora After: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20A.jpg
Caldera Before: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20B2.jpg
Caldera After: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20B.jpg
Looking south Before: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20D2.jpg
Looking south After: http://dl.dropbox.com/u/46396473/MGE%20Screenshot%20D.jpg
There are some problems.
1) The main one is everything is now sunk into the ground. This could be globally "fixed" by a tool that will make a patch esp to move everything up by adjusting the z co-ords. Would need to find someone with knowledge on how to write that, and the tool will need to use the same movement rules as the landscape.
2) At 1.6 times increase, it's now impossible to walk up red mountain from ghost gate. Just too steep. Would need to test different multipliers to see what is the maximum.
3) Mod conflicts. Since it's changing the entire landscape, almost every mod will conflict in some way. Again, if a tool could be written that could patch mods that would help. Although every patch file would need checking as some things will still be out of position and need fine tuning.
Instead of a flat mulitplier across the entire landscape, I'm thinking about gradually increasing the multiplier based on altitude. So sea level, no change, 50 meters up, 1.05 increase, 100 meters up, 1.10 increase, etc, etc So the lowlands will stay flat and gentle gradients, while the big bumps will be bigger, resulting in more dramatic pictures then the ones above.
What do you guys think? Worth doing? All depends on finding someone to write a tool though, otherwise it's a major job to manually move every item in game to it's new position.