my guess is you should try reducing the distance between the far and the near clipping plane which will increase the depth accuracy. you may also scale the whole landscape down to around 100x100 to improve the floating point accuracy. and finally you may want to change the depth format to D3DFMT_D24S8 instead of D3DFMT_D16 (assuming that you don't use that format already). btw what's the size of the landscape?
the landscape looks kind of upside-down here.
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