I agree with Ascension that it actually looks pretty good.

You are right about the feathering from Torq's tutorial. In my experience thus far you get too much extraneous stuff if you are trying to stay within a pre-defined shape. I'm sure it depends on the overall size and pixel resolution but try 10px feather.

Also with the emboss method, did you remember to bucket fill with 50% gray? I think that doing it twice will get rid of the depression around the mountains. Good luck with it, I too have been struggling with getting mountains I am satisfied with.