Yes thats right, remember everything is a branch on a big tree. So don't try to group everything all on one twig. Make a street in clear parent, put some houses on it. Attach the clear parent to the city base map. When the clear street is off of the side then no houses need to be drawn. I knew a movie would explain it a little better.
IMO to do full seamless I would still use bitmaps to do base terrain. Keep it simple and get the basic shapes in using that, keep to a limited palette. Then it will fit together ok. There are some extra functions within the app for helping a little there too. Once you have the thing all mapped out to a really basic level then you can get the app to make a new icon out of a screen image. It will get all the scale right and then you can attach that new icon back into the place it came from. Now editing this smaller area you can add stuff to it until you have that area done in patch icons / splats / new artwork etc. Then you can replace the image of the basic map to clear and it will be a clear parent sitting on the base map at the correct scale etc. Thats a more advanced technique but thats basically how you do it.
BTW. I have just made and uploaded the icon08 demo. Do you want to test that out say Monday evening ? You can grab that :-
ViewingDale iCon08 demo app
Email me with a time. Say 23:00 by the tycho clock maybe or whatever you have free.
Edit -- I should add that time should be UTC (so many timezones...). Also on my forum and the four ugly monsters there are the details of the iCon08 Ventrilo server settings. If your able then get a headset and mic and you can talk. We can do it by chat but its not so easy with the type lag.