Ok, i found a plugin for terragen that exports to DFX. http://homepages.ihug.co.nz/~jomeder/feo/index.html
Follow the directions and voila! in order to get the proper materials, you need to still plot the locations of the camera, and there are too many polygons so that it is broken into several sections, but give them all the same material and hit the win button and you’re there
(warning: It takes me about 5-8 minutes on a pentium 4 to import the DFX into blender)
Thought it might help!