SL tends to be a very small world when you look out from your place.
I propose that SL use the same kind of distorted background image techniques that other games use. The results may not be pretty, but it would help knit the world together.
I am going to list 3 options in order of difficulty.
1.Client only change (Easiest, but flat effect)
For any Sim past the set draw distance draw the map textures of the neighboring Sims at the ground heights of the corners of the Sim you are in. The 12 tris would be rendered starting from the Sim corners going out flat. The corner rectangles would be tilted as necessary to line up with the N,S,E,W rectangles.
2. Sim and client change. (Harder)
For any Sim past the set draw distance have the Sim give you two textures. The one would be the vertical view (Map view) and the other would be a Alpha side view of that Sim. The client would then place The map textures as above, but it would then place 8 overlapping alpha textures around the Sim. Each Sim would have to create 8 Alpha textures to cover the 8 possible directions.
These pre-made textures would be made every x hours or so just like the map.
3. Texture on demand. (Possible?)
This would every x minutes give you new background images based on your approximate position. Each Sim would use the next Sim to render it’s view of that Sim to create a complete composite image. Lighting would be done in the client as each face of the octagon surrounding you would already handle lighting based on sun direction.
Note: I do not know if the Sims can render scenes since I think they use a separate computer to make the map using a modified client with a video card.