For a similar terrain system which uses chunks, check out this project. Check here to see this adaptive terrain algorithm applied to full-scale planets. Also take a look at this article which goes into more high-level detail regarding the algorithm.

QuadTree Terrain is a C#/XNA program demonstrating a quadtree terrain splitting algorithm which can be used to render very large-scale worlds.

As you move around the terrain, the level of detail will increase/decrease based on camera distance. The scene is built using deterministic noise which can be modified by changing the parameters in the code. There is also a water plane which adds a bit of variety to the landscape.

You can explore the world using the mouse and keyboard. When the program starts, you must press C to attach the mouse to the camera. You can then use the WASD keys to fly around. If you press Space, the camera will follow the contours of the terrain as you move.