Finally the lighting system for the terrain's done. Reaction Engine terrains will feature a real-time or rather a 'pseudo real-time' GPU accelerated accurate soft shadows computed based on the sun's or the moon's position. The terrain will not just self-shadow but will also dynamically and correctly cast its shadow on any object on the terrain which will again be soft. The pic below shows the lighting system at work. The sun is at an angle of 20° from the horizon.
P.S. Texture splatting was disabled to highlight the shadows. The thing looks really nice with a proper blend of grass and sand textures. :)