Hmm.. sounds simple, that image clears up a lot of questions I had about the fuzzy zone!
I was also thinking that this type of technique could work in clouds as well, but I suppose a distribution shader as the blending shader should work in there as well.
Is it possible to control the blending the distribution shader does (say, with fractal breakup or something), or is it always a smooth transition?
In the pic above, is 0m to minimum altitude and 1000m the maximum altitude of the distribution shader?