Help with rocky normal map for terrain

I’m working on some hills to use in the secondlife game engine. They are very low poly, but I’m looking to make normal maps for them. I’ve never made decent normal maps before, and today doesn’t seem to be my day either:

It looks like this in-game:

It has the same issue I always get when I try to bake normal maps; it has way too little contrast and is pixelated. My strategy for generating it was:

  1. multires 5x
  2. sculpt some large bumps
  3. add a displacement modifier using procedural clouds
  4. Try to bake using multires
  5. 4 failed, so I reshaped the multires to include the effects of the displacement modifier
  6. bake using multires again. It works now

That’s where I am now. I’m not happy with the normal map at all. I’m curious if I’m doing something wrong

Here’s the blend file with irrelevant parts removed: