that's actually exactly how i create these new textures.
I enlarge the original, pixel for pixel, to the size i want, and then turn the opacity down to 50% and work underneath it. I match all the dark/light areas as best as i can(wish i had a tablet). I'd say i get within a reasonable tolerance, maybe 2-9 pixels in or outside of the lines in some areas. What's hard it that you can't tell which areas are supposed to match up, so if it looks bad or doiesn't line up correctly, your stuck recreating the entire layer mask again.
The blur is what causes the edges to misalign, but it usually looks alot better than the snow just cutting right off. The low-res texture's actually don't blend together well at all, take a look at any mountains ingame, especially near corners. The low-res, muddy nature of them makes it much less noticable than a hi-res texture. The mountains near midgar are a perfect example of this.
lee
here's a nearly direct copy of the rock areas on the stock texture. It all lines up fairly well, better than anything i've freehanded. now i just ahve to find a way to make it look smoother.
*nope, any amount of smoothing causes the tiles to be very visable. It's the blockiness of the stock textures that mask this effect... damn...