A small remark:
... As a consequence, the creator of HOG (the program that actually creates the terrain for Trainz, which is used invisibly by TransDEM)
TransDEM 1.0 and 1.1 incorporated HOG indeed, by producing output suitable for HOG to actually create the Trainz ground file. However, starting with TransDEM 1.2, TransDEM generates the ground and all other route files itself, no longer making use of the HOG software. This way TransDEM became much easier to use and more flexible, now also allowing later modification of a route.
Nevertheless, even with TransDEM handling all the Trainz files internally with its own software library, the general idea, introduced by HOG, to map a ground texture pixel to a ground vertex is still the same, kudos to the author of HOG here for his brilliant idea.
As Jerker correctly mentions, to overcome the ground texture resolution problem, we have the TransDEM UTM tiles, flat texture carrier objects suitable for ortho images like Google Earth.
And TransDEM also offers to place Trainz spline objects right into the route, another alternative for transferring map data to the Trainz project.
The tutorial in the TransDEM Trainz manual illustrates all three methods: ground textures, UTM tiles, and splines.
PS: Upcoming TransDEM for TS2009 will support the new 5m terrain grid as an option, allowing for higher ground texture resolution. 1:25000 maps should work, after 1:50000 with the 10m grid, but ortho images (often 1:1000) will still work better as UTM tiles.