As for snow on roofs, I don't think there could be a better way than displacements to do it.
First, they are easier on the engine than brushes or objects (that comes from valve wiki)
Second, it would be real easy to slap in a brush, make the top a displacement then paint a nice rounded mound of snow.
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http://i31.tinypic.com/286wh21.jpg
That's the shot that really made me think it looked like they dug a hole in the snow. Maybe the rocks are grey, but to me that's not enough contrast.
Probably should be the red rocks so the snow really stands apart.
As for realism, I've lived in seveeral places (or visited ) that were red rocks with snow. Sedona,Az, Moab, Ut, parts of Colorado. Snow does happen in deserty climates. The Grabd Canyon is often covered in snow in the winter.
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As for the lighting issue, try a different approach. Obviously you need brighter lighting so players can navigate. If that's washing out the snow maybe the snow itself is too bright.
This sounds wrong but I think it might work.
Make the snow more grey, then bright lights just may wash it out to white.