After playing with it for best part of the day, I got projective textures more or less working. More or less, means that it displays. Sometimes. Because of z-fighting the radius of terrain tool might not always be displayed, however most of the time it's there.
Tomorrow I'll try to fix this and a weird bug I'm having with camera, and eventually move to modifying the terrain in correct way. After that it'll be adding more usability to the terrain sculptor.
Things to be implemented:
-Raise
-Lower
-Level
-Grab (optional)
-Smooth
-Erode
-Push (optional)
-Ramp