I read an article a few years ago on mesh optimization. It presenteda method for dynamically tessalating geometry, that handled LOD similar to what you are looking for. Rather than simply descimate the geometry it calculated the best representation of a geometric surface using the fewest triangles.
Check this link, it might get you going in the right direction.
http://research.microsoft.com/~hoppe/#meshopt
Allan
Check this link, it might get you going in the right direction.
http://research.microsoft.com/~hoppe/#meshopt
Allan