I believe there's a mod by Vality (Balmora mod) which adds the swamp look and, don't quite remember, if you check just one or both then the trees will disappear when you get close; only from afar you could see them. The other member said that MGE chooses the applicable mod automatically. That may be true BUT the thing that confuses me is that you can check both ways at the same time without getting any warning messages. It's very tempting in MGE distantland creator to choose ALL the mods cause it says "Select any plugins to use in distantland". It would be helpful that in MGE mods that shouldn't be checked be grey out or get a warning message.
I checked Better Bodies in the MW launcher. So, my logic tells me I shouldn't check this mod in MGE cause it doesn't have anything related to distantland. I think....... I don't know cause MGE doesn't let you know. If MGE chooses the applicable mods automatically then why doesn't MGE barred you from choosing the rest of the mods?
The plugin selector in MGEgui's Distant Land File Creation Wizard is specifically for telling the distantland creator which plugins should be checked for creating distantland files - the selection determines what the world texture and world mesh should include (think of it as a world map which textures the world mesh), and what statics (if any) should be included for distant static creation.
In order to generate distantland files appropriate for your current active load list, MGEgui needs to be told precisely the plugins you're using. MGEgui then decides what statics to generate based on the minimum static size selected during the DL Statics step. If MGEgui where to just grab everything from your 'Data Files' folder, you would have to micromanage your plugins so that only the ones you plan to play with are in that folder. It's much easier to just be able to select your Morrowind.ini to get the active load list - that option is available during the DL 'Select plugins' step (v3.7.2+). You can always add to the plugin selection list any plugins that are designed just for distantland static creation, like Vality7's grass betas.
If you're using MGEv3.8-svn_rev0099 or newer, you can place plugins that should only be used for MGE distantland in a folder other than 'Data Files' ('...\Data Files\MGE static plugins' is a good choice). Then you can browse to that location and add those special case plugins during the Plugin selection step. That way you can keep MGE distantland specific plugins separate from and out of your Data Files (i.e. no chance to accidentally include them in your active load list). Another option is to add something to the start of the plugin file name like ' !MGE Only! ' so it's obvious where to use it.
The plugin selector has nothing to do with marking plugins for the active load list - that's handled by Morrowind Launcher or Wrye Mash, or some other mod manager.
It's perfectly fine to have a plugin selected on both the MGEgui DL Wizard plugin selection list and the MW Launcher Data Files list, especially if you want objects to appear in both MGE distantland and MW's standard draw distance. The exception is plugins that add animated statics to distantland (e.g. Vality7's grass betas) - you usually don't want to add those to your active load list since MGE handles all the rendering, even within MW's draw distance.
You're correct about plugins like Better Bodies - if you know a plugin does not add landmass or objects to exteriors (including interiors behaving like exteriors), then you can safely omit it from the DL Wizard Plugin selection. Objects might fade into MW's view distance if they're added to exteriors by a plugin that you chose not to include, and there's no harm to the actual plugin - it will still exist in the standard MW render range, it's just not going to be rendered by MGE. Conversely, you might get some objects fading out between the distant view range and MW's standard view range if you create distant statics for a plugin, then exclude it from your active load list afterward - in that case the plugin is not active so there's no data from that plugin for MW to know about, and regenerating distantland without the plugin selected in the DL Wizard will fix the ghost objects that MGE was rendering.