I have tried multiple times to use Optimized Distant Land MAX, but every time I keep getting grey landscapes in the distance. I've downloaded the OMODs for the main file and the UL patches. Does anyone have an idea of what I'm doing wrong? Should I uninstall the Unique Landscapes, install Optimized Distant Land Max, and reinstall the UL's on top of that?

Did you run http://oblivion.nexusmods.com/mods/15781? (A simple one-click solution.) It is necessary to restitch together your new distant landscape. Suggest you read the 'Oblivion LODs' page on 'http://testg.wikidot.com/main'.

-Dubious-

Actually, the fog settings for the weather active at that time determine how distant LOD meshes are rendered. If they are a solid color, it means that the fog distance is set so that those meshes are rendered with the fog color instead of their textures (something that can improve performance BTW).

Using the mod All Natural gives you the ability to set fog distances in the ini file.