All these things are possible and I use them. Spotlights are the easiest but are always round in shape and therefore need masking. Moreover, spotlights do not always 'feel' right and are an additive on top of the existing lighting.
I frequently have problems with the procedural nature of Terragen and landscape software in general. Don't get me wrong, procedural is great; you get an entire planet with unparalleled detail to explore in no time, but if you want to design a landscape based on a sketch, it becomes difficult.
What I actually want is more direct control over the look and shape of everything. In this respect, matte painters have fewer difficulties; they can paint clouds and shadows without worrying about technical correctness, as long as it seems correct.