Though I keep hearing otherwise it is perfectly feasible to create very large terrains and outdoor scenes without lag, the terrain below is 35x35x14 segments and covers a huge area with cliffs, peaks and paths, its a mere 6034 poly's and could easily get away with more for detail if I wanted to. The skybox is created to tie in perfectly with the terrain giving a further appearance of real depth to the scene.
Player collision only with no areas hanging up.

Screenshot from map editor, player marker gives an idea of scale.
Framerate 51-53fps.

Bear in mind the comp I am using for screenshots here is a laptop:
1603 Mhz processor
1Gig ram
Nvidea GeForce go 6100 integrated graphics.
Its a donkey but this is what I can get even with this.
Skybox is created using same textures for terrains to tie it all up.
Full 40x40 segment terrain, centre 20x20 sliced for enemy collision. 3200 polys. You would be hard put to find the edges of the terrain (which is more hilly) they fit seamlessly with the skybox. The enemy characters follow terrain contours perfectly.
Quote: "Of course you will have to keep them there by adding walls, fencing, or invisible walls in amongst vegitation or such like"
You dont have to use invisible walls wherever segments are placed enemies will not leave the path/area as null space (introduced to prevent enemies walking off platforms etc) will take care of that for you.
Quote: "an even more difficult issue to overcome is the simple fact that FPSC does not handle at the moment outdoor areas well in the latest versions and fps is likely to be slower than indoors. pro rata."
Version 1.17 has an excellent framerate improvement which for some reason got drastically reduced in V1.18 and not only for outdoor areas, seems to be across the board..