I made some good progress over the weekend. I rewrote the code a couple of times and now it starts to be acceptable. I changed my crappy vertex insertion code to actual Delaunay triangulation code and the meshes looks far better now, and the speed is about the same.
The height detail mesh is not as accurate as the rest of the Recast functionality. But it gives great height approximation. If you want to make the character to follow terrain accurately, I'd recommend to use the navmesh height as starting point, add some offset and do a ray/sphere cast.
Now I have spent more time integrating the code to rest of the system and doing small rewrites here and there in order to move the data around easier. I'm currently working on the Detour side, making sure all the required functionality is there. Next up is smooth path tessellation so that it conforms the detail mesh and support for tile preprocess as well as tile navmesh. One little feature and a lot of support coding.
I have been recently neglecting to reply to project related emails which require longer replies. I try to arrange some time soon to make it happen. So if you are waiting for a reply, don't panic, I try to answer soon :)