Hi Arcanor,
I think geometryErrorThreshold is the same thing as the HEIGHT_ERROR argument in the atlasOldGenerateChunkFileFromRaw16 function. When Atlas is merging geometry to generate the optimised LOD mesh, the geometryErrorThreshold value sets the maximum acceptable height deviation between the shared vertex in the original geometry and the average mid-point height in the merged geometry. For a better explanation, I suggest you look into error metrics for terrain level-of-detail algorithms (geoclipmapping, ROAM, etc.)
Anyway, the upshot is that - in theory - a smaller geometryErrorThreshold will give you a more detailed and accurate terrain mesh, but with a larger file size. In reality, I'm not sure that part of GarageGames' plugin was ever wired up, so it might be using a hard-coded value. I'll see if I can find out from the developer.
To experiment with changing the height error metric, I'd suggest trying TGEA console/script functions. There is a tutorial on this in the wiki here:
http://www.bundysoft.com/wiki/doku.php?id=tutorials:torque:madcowthomas
(thanks to MadCowThomas for thew tutorial)
Cheerio,
Aaron.