Actually, no. All that needs to be on is the skydome shader button, no matter altitude or shader settings.  When you move water or landmass above 4, the detailed version of the shaders come on. It is possible that the non-detailed version of the shader doesn't run for you either (Emilian told me yesterday of some implementation-specific things which my nVidia unfortunately tolerates without complaint).  So my second guess is that you don't have an nVidia card.

I tested last night with win7 and xp using ATI cards (winXP - hd3850, win7 64bit hd5870 tested with all ATI drivers since 11.4 beside the latest) and the skydome shader is crashing fgfs. The crash looks like the crash that occours if i enable the generic shader. No console output.

Besides that the fps are better then with the standard weather.
This is even more noticeable with bad weater (standard 20fps / advanced 55fps).