Setup
You must first have terrain meshes and the layered textures in mind. The only textures you can alpha blend is with ones that end in "_blend" otherwise it will be an on/off kinda thing without anything in between.
1: Select all the terrain meshes you want to add a blend texture to.
2: Copy the terrain meshes (space bar) and move them away from the source but DO NOT modify them.
* I personally raise them 16 units (Press 4 then move it up one box) so I can paint on the texture with the other models and objects in place.
Blending
1: Reselect the terrain you want to edit if needed and press "Y" to bring up the Advanced Terrain Editor.
2: Select "Flatten" and "Alpha".
* Check your different radius and Amplitude will change how fast the texture changes.
3: Hold "Alt" and hold Left click or Right click on the texture in the 3D window.
4: Once satisfied drop the mesh on the original so they occupy the same space.
Important: You can still move and edit the meshes but be sure to select both by dragging your mouse and holding down the selection button otherwise they will become split.
