All I can say is I'm over here doing the :run: "HAPPY DANCE!!!!" :dmc: I've figured out this issue. :dance:
Screens,
http://i967.photobucket.com/albums/ae157/chucksteel/ScreenShot42.jpg
http://i967.photobucket.com/albums/ae157/chucksteel/ScreenShot41.jpg
http://i967.photobucket.com/albums/ae157/chucksteel/ScreenShot40.jpg
Being, Extremely "anol Retentive" and, "Obsessive Compulsive" I just couldn't let this one go! I wanted to know why this was happening for myself and, for my mod!!!!
It seems we both made some mistakes, Yours was you didn't set up your "worldspace" completely. Mine was I forgot to tell you about a step in the LOD Generation process, (at least I think I forgot to mention this in my poorly written tutorial,(Sorry, I'm not a very good writer but, I do try.)) :banghead: This is a learning process for all of us, we all make mistakes.
To fix your issue, first remove all files created during the LOD Generation process. Data\LODsettings, Data\Meshes\landscape\LOD and the Data\textures\landscape\lLOD files. Next open up your mod and go to World\Worldspaces select your "New Worldspace," (Volcano). Set the image space to "NV Default Exterior" and, the climate to "NV Default Climate". (I'm not sure if setting the climate is necessary but, I did this while diagnosing your issue and, it didn't hurt.)
After that, re-run the LOD generation.
"Now were on to my mistake!!! :brokencomputer:"
Once LOD Generation has finished, go to your Source\Textures TGA\landscape\LOD\ "Your worldspace" (Volcano), delete the (empty) "Diffuse" folder and, rename the "DiffuseGenerated" folder to simply "Diffuse". Move the entire LOD folder back to your Data\textures\Landscape folder. I think I forgot, to add the "Diffuse" folder issue in my little tutorial. :brokencomputer:
Launch the game and, go check out your fully textured, LOD Generated worldspace.
By the way, you owe me a day of my life or, at least a cookie! "I like oatmeal raisin"

'
I'm really more glad to know that my LOD pack and the LOD Generation process still works as it should.
cev