well when you use the mesh smooth modifier, theres an iterations box that lets you specify how many passes of mesh smooth you want to do (higher number = more polies). dont go over 6 cause it will slow max down to an unuseable level. thats all you need for that one. youre really just using it as a subdivider (and the subdivide modifier sucks
).
on top of that modifier use displace modifier. set a displacement value, 2 or 3 works well. a decay value if you wish. then you get a couple buttons to load an image as a height map. a blur value, adjust as needed, no blur = jagged, high blur = smoother. 0.2 works well on youre map. then you get a section for mapping coords, just click the use existing mapping check box. some tweaking and you get a very high poly mesh which you can use to generate a normal map with. for your low res model use a copy without mesh smooth and displace.
i think this gives a better result than converting a height to a normal with the nvidia photoshop plugin. i did this in 2 minutes btw, the normal map compiler takes a little longer
btw, cool normal maps
