Yeah I remember hearing that SOTC's "SuperLow" LOD was a 2D image. Trespasser also did that, but only for trees and props, not for terrain objects. Trespasser being basically a heightmap with dinosaurs dropped in
Even modern games replace distant geometry with billboards. Simplygon is one middleware that does this. The Remedy folks talked about how Alan Wake 2 used it at GDC last year or the year before.
