I have completed the items on my to-do list!
I finally stopped the terrain from disappearing (for the most part ... I still had two instances where it happened). I discovered that I had a key subtraction backwards. How it even worked at all before, I will never know.
I got each terrain level to move at its own stepping distance by storing and updating a world matrix for each level. Luckily my CPU was hardly being used at all so I could easily spare the CPU cycles to do these extra calculations.
I fixed the gap between separate levels by simply making the square mesh slightly larger. Previously, the mesh would extend from (-1, -1) to (1, 1), but I updated it so that the range is (-1.25, -1.25) to (1.25, 1.25).
Now for what you've been waiting for: a new video. In fact this time I have two new videos for your enjoyment. One showing off the new terrain, and another showing it in wireframe mode.
On a separate note I just ordered a new laptop, so I will finally be able to do development on my laptop again. My current laptop only has a GeForce 6100, so it couldn't handle my shaders anymore (no unified pipeline). My new laptop has a GeForce 9800 GT which is about 20 times faster than my current GPU. It will be awesome!