Well the system in Outerra is a bit different, you cannot expect to have such results while using the approach as in FS.
Although, a landclass-like system will be used as basis, with 500m resolution but refined with fractal techniques so that the transitions between types are natural. Land class is here defined as ground textures and vegetation sets with assigned probability rules (related to terrain attributes). So yes, it will be a hybrid system - for example, rough raster defines where lies a forest, but the transitions will be fractal and individual trees/shrubs are still subject to probability rules so that it looks natural.
As the result, this system should create Earth roughly as it would look without human interference.
Atop of that you can have vector data defining mainly the changes in environment caused by human activity. Roads, fields, pastures etc. These have sharp edges with respect to the surrounding environment; the transitions are still subject to fractal refinement but at a much smaller scale.
The only place for autogen I can see here is for large polygon-defined agricultural areas where it could automatically create single fields and auto-assign the classes. There should be also a city generator, generating cities/towns/villages in specified area - this should be probably based on OSM data so that roads are defined correctly, and buildings are generated in the polygonal urban areas.
Custom elevation data - the elevation data and other raster data have to be processed first, in order to get them into our format that is LOD- and progressive download- friendly, and compressed. If you have a custom patch of data, you'll need the surrounding terrain data as well to create the terrain files. But there should be a tool later that will be able to do this.
But the point is - in order to get the detail on every level and to have the natural terrain appearance you can't do simple things like defining a new land class with a single texture and assigning an ID for it. You have to specify the vegetation and probabilities, a set of textures and their fractal blending styles etc.