I just experienced the same issue as previously stated where the .lod file causes the game to crash on loading the worldspace. This was for a world 84 cells wide. I generated one for a world at the larger 128 cell width and it worked fine.
I tested this further with various sized of LOD file and worked out that the width of the world you enter has to be a multiple of 32. Tried it with 32, 64, 128, no problems. Multiples of 8, 16 and other random numbers causes the game to crash on loading the worldspace in question. I'm guessing the .lod file has to represent full quads and not individual cells then, since if I'm not mistaken a world size of 128 cells would be 4 quads wide, so each quad is, coincidentally enough, 32 cells wide. I'm guessing if your fella's got some time to do it he could fix it by just making whatever number you enter for world width round up to the nearest multiple of 32.
We found the same thing. Make the program rounding up to nearest 32 is a good idea, thanks

Right now we are trying to figure out what
all the values in the .lod file code actually do.
00 ff 00 ff 00 02 00 00 04 00 00 00 20 00 00 00
The first four is the x cell coordinate, second four is the y cell coordinate, then there is the value for how big the worldspace is. These are the values that our lod file generator will change at the moment.
Anyone know something about the rest?