Thank you very much for your answer.
I've ran Texgen and dyndolod agian today and dyndolod ran without any problem 3rd time around (no error message box at all). and lo and behold, problem solved.
I didn't know 21 was an insane value! but now that I generated lod just fine and running the game is no problem (I have a powerful PC and it runs 60 fps no prob), is it necessary for me to reduce that? I've tried to change that value in the MCM menu in the past but somehow it gets reset everytime I run the game and I don't see that setting in bethINI or Dyndolod INI. If you could point me to the right direction I would be very grateful.
Again, thank you very much for your answer. Now I can actually enjoy the game.