So basically you have object A selected, and say vertices. Now you select object B and it automatically goes to vertex subobjectmode, from what I can read? (hah, in the time I typed this, I could have just tested it)
Quickest way I can think of right off the top of my head is to write a quick script to check if the face center/vertex is facing towards or away from the source geometry's face. If it's facing away from the normal, that means it's inside the volume.
Thanks for the help, everyone! I have now found highly useful tools for exactly what I was looking for and then some (locking selection and moving from a vertex instead of the pivot is even better than what I had in C4D!). Much appreciated.
Another artist with a similar style that you may be interested in is Erwin Kho - his stuff isn't real-time, but you may be able to get some ideas from it, particularly in his use of (I assume) vertex colouring to add interest and detail.
Sculpt it first, figure out UVs and texture resolution later. Make something that can tile and look into how you can effectively use vertex coloring and other material editor tricks. BTW, why are you using UDK instead of UE4?
It's generally not a great idea to deform the MultiRes mesh at a vertex level (i.e. using anything but the sculpt tools) - the mesh's sculpt data gets distorted and you end up with artifacts like that. I think there's bugs in for that, but currently it's just an annoying limitation of the system :/
It's not a proper edge ring because the associated polygons are not quads; therefore, the Insert Edge Loop tool doesn't know which way to go (this is why edge loops stop at ngons and triangles). Alternatively, you can extrude the center vertex with a length of 0.
In the "snaps" tab, I typically have one or the other selected. (grid or vertex snapping) Using grid snapping in any kind of perspective view is usually not usable (unless creating a primitive on the grid.) Just in case this helps you find your solution.
Today I added vertex animation to plants to simulate some subtle wind and added some bulrushes(cattails) to the scene. So I have 3 plant types now :) also started to edit sky to make it more yellow/sunset style.
Basically yes, that's what I did, here is my material setup, mesh, and max file. Ignore my vertex painting I did, I was just testing something and it has no effect on the final result. http://dl.dropbox.com/u/82963315/Holotest.zip