You should learn the basic theory of the stuff you want to do

1:
Start reading some articles about LoD Management:
http://scholar.google.de/scholar?hl=de&q=level+of+detail

I don't know how the dirt ways in WoW look or how they are created but you could create models at runtime (maybe just once as you want performance) that will feature the stuff you want to have...

2: I can just give you the direction:
Create a dynamic model based on the terrain height that contains several randomly rotated quads displaying a gras texture. The quads may be snapped to the terrain height to get a better look.
A more modern engine would allow improved and really dynamic gras patches:
https://www.youtube.com/watch?v=mscStU9rwaM
This is a demo i've written to test tesselation and geometry shaders in OpenGL4, not usable in GS

3:
Yes, they are some basic shaders. Read the manual to find out where and how to use them

Regards
Felix