Placing entities...

If meshes that represent buildings/houses are placed on terrain using an editor such as ALE or TerraED, then I'm assuming everything must be exported out as one mesh. If I want a player to be able to walk inside one of these buildings with no transition, am I still able to accomplish this since the buildings are now basically part of the terrain? Or will I need to place buildings with code in order to allow for this? Or is there an editor that will assist with this?

Also, in order to maintain accurate collision detection, do the parts of a building such as the walls need to be separate entities such as cubes for each wall? If this is the case, then must each separate piece be placed with code or is there an editor to help with this?

You can easily produce your own editor. This is the easiest thing. Walk trough your world and add a fileselector that will let you choose a mesh to load and position.

Alternatively I have released pledit, a placement editor for plasma, open source: www.melog.ch/dl/pletid05.zip

Loading the parts of a map as individual meshes mill make it easier to check for collision in the game. If you load everything as a single mesh, you need to identify the surfaces to find out more about Collisions. And evn then it may be impossible when you have two Houses on the terrain which use the same brush, the may be part of the same surface.

Using an editor that will let you position meshes will surely need a loading source that will load your creation exactly the same way as you created it. So in the end it mihgt be as easy as "success=loadlevel("mymap.xyz")"