Auskennfuchs has a good point. The level of triangulation you're doing isn't really necessary to get a smooth looking surface - instead, proper normals and lighting will go a long way towards getting the right look. Here's what my terrain looks like, with a fairly coarse triangulation shown below:
If you're interested, I have a bunch of posts on how I do my terrain:
(At the end of that article there are links to part 1 through 5).
Yeah I remember that now. I used to study Phong Shading with Pascal(very long time ago). There no need of too many triangle to make surface look good. The shading can make it somehow. But we still need enough triangle right ! Like in my first ScreenShot, there no way Shading can make it look smooth ? In my smoothed version ScreenShot above. I used LOD=10, I think we can reduce to 3 or 4 and use your shading idea!