Looking good! Flying around feels pretty cool already, although it's a little hard (for me at least) to kill those enemies.
This could go very well with some bumpmaps and of course more variation to the terrain in general, not only texture-wise, but also regarding the z-distortion. There seem to be only flat ground and those steep hills that block you.
Good job on the collision detection too. You didn't tell me yet how you do it.
I'm planning some tryouts of my own on this subject soon.
Keep it up, I'm looking forward to some badass weapons. Sort of homing missiles, because my aim ******
Oh and I like the background story about terraforming....