I'm also trying to get the depth buffer issues sorted out early on this time, but without tying them so closely to distant land. DirectX 9 makes working with depth buffers in shaders far, far more difficult than any other system (OpenGL, DirectX 10, 11, they all make it a breeze, just another texture), so that will take some time to get working.
I'll occasionally update this thread and will post a thread when I have screenshots of the functions. I'm planning on also merging my existing MGE and NWN shader forums into a single forum for this project, as it will use the single framework for both games (and more, when I'm done with these two).