Maybe I'm biased since I worked on it but you should see the clouds & skyboxes in Pirate101. There are some great cartoony clouds and skyboxes, it's F2P and you get to fly some airships pretty early. (they are mostly static clouds but the vortex portals to other zones are pretty nifty looking)
If its a large focus I think you could get a pretty cool effect using an fur shader on some geometry for distant clouds. I remember Neox doing a test with this a long while ago and this is his result. You could probably even have some panning textures for some more wispy cloud details to give it more life.
Friend showed me this vid of a plugin some time ago. Maybe it could be useful for what you need. It's not free though. [ame="http://www.youtube.com/watch?v=2VNMOS557W8"]Cloud System Demos - YouTube[/ame]
I think sprites might still be your best bet, I did a quick search and these look pretty nice: [ame="http://www.youtube.com/watch?v=KdaIBKl2DY0"]UDK Clouds with (fake) volumetric textures - YouTube[/ame] I'm not super familiar with Unity but soft particles will help with it intersecting with terrain. Here's a talk about it…