Thanks so much Okami! In response to the first part of your question, the reason why you need two layers for the mountains is that at a later stage you will be erasing (fading) the hard edges of the mountain pieces so that they blend in together to make a seamless whole. If you had placed all of the mountain pieces on the same layer, then you could not do this; any attempt to erase (at low opacity) some portion of the mountains would erase all of it. As to the second part of your question, well, you could always add a land mask to the mountain layers, that ought to do it.

Cheers,
-Arsheesh