When I first start getting a new terrain in the engine, it usually looks something like this:
Using bright colors is an easy way to visualize the different information I have generated using GeoControl such as slope, erosion deposits, and so on. Once I am convinced I have everything I need, I move on to creating the final color map.
When I start on the texture in Photoshop, I usually use "select color range" on the different colors and use those selections to make masks for new layers. This allows me a lot of freedom to try out different colors without having to do a lot of work. Here I changed the red to dark brown to represent rock, and changed the blue and green colors to shades of white and grey to represent snow. When you are doing this for many levels it becomes really important to make the process as painless as possible!
P.S. tonight happens to be John's birthday! I hope everyone will wish him happy birthday in the comments and in IRC [when he wakes up].