Have you had any luck with the function smoothTerrain(mb, smoothFactor); located on the CTerrainSceneNode.cpp source file ?? I've noticed that the smooth factor is always set to 0 and not used in any of the of the Create Terrain or loadHeightMap calls.
I wonder how this would improve the terrains that normally look very jagged ?? I noticed that you added a ccbSetTerrainSmoothing(terrainnode,20); in your API but I could not get it working correctly and always produced strange texture artifacts.