In general, even as CPU power increases, the "fake" will tend to be faster than a true simulation. If the results are equal and the "fake" takes less time and/or is easier to control, then for most people the "fake" will be the better approach. As long as this continues to be true, Terragen will likely be using "fakes", while trying to cover as many aspects of the real world as possible. Creating a proper, physically accurate simulation of global weather dynamics might get you highly realistic cloud patterns, but it's going to be incredibly demanding on processor time - imagine letting your computer sit overnight, or even over a week, computing the results of a single day of global cloud movement - so it's really not worth it if simple methods to achieve visually similar results can be used.
In regards to the other programs that do some of these things easily, most notably 2D image editing programs, you have to keep in mind that they're operating on finite, 2d images. Terragen operates primarily on infinite 3d noise functions which are rather more difficult (and resource-intensive) to manipulate in the same way. It's similar to the problem of procedural erosion. That being said the "Warp" functions in the Power Fractal can get you some decent results...
- Oshyan