Actually you can base your triangle split/collapse on any of these parameters. But think first: do you really need real-time simplification process? Current GPU's can process really big amount of triangles (you will not be able to update each of these triangles every frame on CPU) so if you really need to do some LOD think about some set of fixed precalculated LOD's and switching between them when needed.

MS currently switching away from fine grained LOD modifications. Original ideas of refining / collapsing can be found here:
Hugues Hoppe hope page - http://research.microsoft.com/~hoppe/