Here you can see the road is split along the terrain edges, and aligns PERFECTLY to the terrain, as if it was cut right out of the terrain. There is no need to have a slightly raised surface, and there is never any z-fighting.
This was written entirely in Lua (except for the surface slice routine)! The script updates one segment at a time each loop, so you can edit without waiting for the road to build. It's pretty fast, but a little too slow to update completely every time you move a road. With the staggered updating, it takes 1-2 seconds to build roads. They took this same approach in Crysis Sandbox.
Here you can see the texture mapping. The UV mapping has to be performed after the mesh is constructed. The mesh in the shot above originally had no UV coordinates, and I had to figure out how to map them! I had a few failed attempts, but finally figured out how. There's no alpha blending on the edges at the moment, but I assure you the road here is completely flush with the terrain.
You can read about one of the problems I ran into and solved here.
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