Thanks, posting these has prompted me to work a bit more on this, though what I've done so far is the easy part. It is one thing to texture map a grid, push some points around and outline some buildings. Now the hard part is to start adding detail.
@ DarkJedi I'm a big SketchUp fan, been using it for a couple of years now :0
Doing the terrain is quite easy (though it is a bit fiddly), a really great set of tutorials (4 in total) is here.
As someone else suggested, you can do this with layers. With the Grid on a hidden layer, that may stop the lag when you are "building", and you can show it again to confirm measurements (though Tape can be used for that to generate your guides as you most likely know)
It looks like a great project, I'd do it myself, but I'll wait and beg / borrow / steal yours when you are done