Alright! After extensive testing and a bit of headache, I have figured out the source of the crashes.
For me, at least, the following does
not produce a crash:
1. Create a 512x512 image in GIMP.
2. Make sure only a continuous square area of 255x255 of that image, or less, is non-black i.e. any value higher than #000000.
3. Any pixel within this square can be any grayscale value between #000000 and #ffffff (although #ffffff will produce extreme mountains for the game).
4. Export as raw data in GIMP, using Planar settings --> it gets the .data extension.
5. Rename the file exension to .raw manually.
6. Import into lndromat.
7. Use the "dummy" .DDS file that came with the 0.96 release of lndromat but wasn't included in the current release.
8. Use the texture files from another land, for example Land1.lnd from the basegame -- or use your own texture set of course -- see instructions in the lndromat readme, in release 0.96.
9. Save as any filename.lnd.
10. Open in BW Surveyor --> confirm that the land looks like the heightmap as expected, and doesn't have any weird, jagged aliasing artefacts.
11. The land appears to be rotated 180 degrees from what you exported your image as, however. Keep that in mind if that's any sort of important to you. However, in-game, you'll be rotating around a lot anyway, so I'm not sure it matters much really unless you're very particular about on which part of your map the sun rises and sets. If so, experiment away and tell me what you find...!
Any other image size, or exceeding this "256x256 square
within the 512x512 image" rule seems to crash lndromat on import. Staying withing those bounds,
within the larger image, however, is fine! Any other image sizes produces either very weird resulting .LND files when inspected in BW Surveyor (think horizontally tiled versions of your heightmap, or extremely jagged toothbrush-like-looking landscapes), or simply crashes lndromat, making you unable to even produce the .LND file in the first place.
But keep to these steps, and you should be good to go!
My tip: create a layer that's 256x256 inside your 512x512 project, and make a 512x512 layer that's your bottom layer, filled in completely black. This is your "background layer". The 256x256 layer can be transparent on the edges, so you only have to "paint onto the black background", and when you export as raw data, it will flatten the image correctly without trouble. This is what I do, so that I know where my 256x256 bounds are (since they're where the layer ends).
However. If the "import textures from land file?" step is
supposed to allow the program to generate textures that make sense, i.e. sand on beach areas, snow in the hills, rock/grass/dry grass in places -- then that's not what happens. Also, the Dummy.DDS file shows its ugly red-and-white stripes when you play the map in-game until you've scrolled over the area with your camera at least once, so it's probably worthwhile to find out where to get some proper low-res .DDS texture somewhere in the game's files (if you wanna use the official textures).
For the which-texture-where problem I assume I still need to define "countries" somehow, which is something I'm sure I've read about somewhere, but am not sure yet how to put into my maps.
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I made this game start okay, using the tips from this post and some others (I.E. installing to a location other than default) on Windows 8, but the frame rate is abysmal! I tried a fix (put a file called DDRAW.DLL into the install folder), and it made a negligible difference. It is sort of playable but rather annoying, so if anyone has any help, it would be much appreciated! The hardware is an intel Core 2 Duo and 2GB of memory. Thanks!