This is what I suggest you to do
1. Tile resolution should be set to 1009x1009. With that, each tile would be approximately 1km.
You would then generate a LOD per tile using world composition and set a distance for the LOD to appear.
2. Now set the number of tiles. For a 20x20km landscape (if at 1009x1009) you’d set the number of tiles per side to 20x20.
3. Output tiles as 16Bit .raw
Lastly, I got very confused when I read the text in OP. If possible attach your world machine file and explain what you want to achieve in a line or two.