There are MANY free GIS softwares. I used ArcGIS for many years as I had a student license, but lost that recently and took up QGIS. It doesn't have as many functionalities as ArcGIS, but along those lines it might be the perfect thing for you because it doesn't have a bunch of analysis tools you don't need. However, the visualization possibilities are more limited in QGIS than in ArcGIS.
Some others (I haven't worked with them personally):
GRASS - http://grass.osgeo.org/
I made a simple plugin to dump each planet's height data to a file, with precision of 0.1 degrees (resulting in the 3600x1800 size). I then used Grass to process and render the slope maps.
The colors should be consistent across all images:
If you wanted to create an in depth custom mountain range there is some good free GIS software here http://grass.osgeo.org/ but if you don't want to download anything or have to navigate a damn near impossible interface You can use the topographical selection in Google maps over a chunk of the Appalachian mountains or over the Caucasians to get a lord of the rings-esque mountain range map.
Not sure how in-depth you're trying to go, but are have you looked at GIS? The biggest open source one I know of is GrassGIS. It's probably overpowered compared to what you are trying to do, but since you said you didn't want to reinvent the wheel I thought I would toss this out there. Specifically, this area of their site: http://grass.fbk.eu/screenshots/web.php
You want to do what's called resampling or if you don't have ArcGIS. This will involve some type of interpolation, cubic convolution is probably best for an elevation model.
Grass GIS has a tool called v.out.svg. You should be able to write a quick python script to automate the query of each and then export it to an SVG file.
If you use Arc, you could also automate this using arcpy.mapping.
There are also SVG related plugins in QGIS.
Have you ever considered using the image processing capabilities of a somthing like GRASS GIS? another link more specific to image processing
Try GRASS, specifically the watershed stuff. I've used it to do exactly what you are describing, although I don't remember if it was r.watershed or another routine that did it. Poke around and you'll find it, anyway.
> Focal Statistics[1]
The equivalent tool in QGIS is r.neighbors, a Grass GIS function that is accessed via the Processing Toolbox (make sure the neighbourhood size is an odd number).
Off the top of my head, there's a really easy way to do this.
Take that particular shapefile you'd like to portray like this and convert to two different rasters.
The first raster has the raster values representing the value you'd like "stepped".
The second raster has the raster values represent the color. It would be best if they have the same "parcel" regions.
Then you can use NVIZ in GRASS to do the actual 3D display. http://grass.osgeo.org/grass64/manuals/nviz.html
Using the GRASS plugin for QGIS is probably the easiest way to use GRASS.
http://www.digital-geography.com/create-3d-visualizations-qgis-grass-and-nviz/
All opensource software ;p
Campaign Cartographer has addons with the 1st and 5th Annuals that are excellent for doing street and city mapping that look very googlesque and take a lot of the pain out of the work; that said, it's not cheap and the base software plus either pack will run about $80 ($120 for both annuals, not that both are necessary). Anyways, you may want to check out profantasy.com if you're not necessarily averse to spending cash.
There's also stuff like http://grass.osgeo.org/ which is free, but has a big learning curve and is probably overkill.
Here is the section of the GRASS wiki on georeferencing: http://grass.osgeo.org/wiki/Georeferencing Here is a description of the Quantum GIS georeferencing plugin: http://www.megwrm.aun.edu.eg/sub/workshop1/georeferencing_with_quantum_gis.pdf
I haven't used these programs for georeferencing, but have for a variety of other functions. I use Quantum GIS with the GRASS plugins. It takes a bit of effort to relearn the functions when coming from ArcGIS, but I've found it to be generally full-featured with a large support community.