Certainly, i agree. If you want to create a very believable scene. Tiles certainly would present issues there. There would need to be a tile object that would conform to the terrains displacement. Completely flat tiles are not going to work as you said. The tiles need an altitude offset function but still have the ability to sit on the terrain at the same time.
What we need is a procedural object designer. An x, y and z vector profile drawing tool to make many possible shapes within that shader. No instancing needed. These objects of course need to be stackable and have the ability to be layered in various ways. Then procedural rocks, logs, twigs, leafs and other objects can be procedurally edited and scattered upon the entire planet.
Also, i would imagine it would not be to terribly difficult to instance along the y axis and not just x and z.
