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The hardcoded 64x64 cell limit can be bypassed using multiple worldspaces. Which people have done before in the past to make their mods work. And look at the current custom worldspace mods (Falskaar, Moonpaths to Elsweyr, etc) and their massive sizes. It would have been simple enough to split the heightmap into sections and simply add specific transition areas (like splitting Ered Luin, Eregion, and Rhovanion up between their respective mountain boundaries), where each region is its own worldspace with some artistic license on the actual sizes and scale of distances (there is a lot of unused space in Middle Earth full of only trails or forests).
I feel like the mod was discontinued due to a loss of general interest after such a long C&D, rather than any technical difficulties or limitations (an incredibly respectable interpretation of Middle Earth could have been made with less). But, whatever their reasons, it's a shame the project is discontinued. Can't blame them, people are human and get tired of things, have lives that interfere, etc, etc. Happens with every big mod.