That looks great.
The problem with simple shadows like that is uneven terrain. If you are on a slope of any kind, the shadow will appear to clip with a hard edge. If you are too close to a cliff or sudden drop, the shadow will appear to hover in air.
I'm also looking into a variety of shadow techniques. Although I don't think it's going to be easy.
Quote: " Although some games use extra camera to render all objects black and terrain white, then just project that image to terrain only."
That's a great method but I get the feeling it only works best in a shader demo. I want like several hundred lights in the game world (worst case scenario) and having a camera draw for each just isn't possible. I suspect I might use this method for a single 'environmental' light like the sun and maybe have all other lights not cast any shadows.