You could try doing this with a gradient mask, assuming I understand what effect you are looking for.
http://www.t-tutorials.com/read-tutorials/32/flawless-collage-of-two-panorama-photos
Thanks for the link. I went through that tutorial, working on my photos, but it wasn't really doing what I wanted... or, rather, I wasn't sure it was doing what I wanted, but while I was going through it, it led me to an "all about layer mask" tutorial and my solution came out of that. I'm going to type it up here so (a) I'll remember what I did and (b) people can tell me where I've screwed up/made something more difficult than it needs to be.

Since the sky is really the area I'm having a problem with (not the landscape itself) what I did was this:
-1- Take the first two photos and overlap them with photo 1 being below photo 2. Take photo 2 and scootch it around until the landscape at the edge of photo2 lines up with photo 1.
-2- To blend the landscape portion (which is textured and multi colored etc), use the "Eraser Tool" with a ~90px brush and 0% 'hardness'. Set it to ~50% opacity and get rid of the hard/sharp edges of photo 2. Zoom in close and continue 'erasing' photo2 until you get a completely smooth transition. At points, I changed the opacity down into the ~20% range.
Now to move onto the sky. This was the main problem for me because it's a single color that has very smooth, natural gradients in tone and color, so even with the eraser tool, you could see the unnatural shifts in shading.
-3- Create a layer mask on photo 2. Do this by selecting the photo2 layer and clicking the "add vector mask" button at the bottom. (the grey square with a white circle in it)
-4- Take the "polygonal lasso tool" and outline the landscape. "Select inverse" so now all of the sky is selected. Now, select the "gradient too" (which is under the "paint bucket" tool) and "drag a line" in the sky where you want the fade to happen. Play with the "opacity" perhaps dropping it to 80% or so, and voila, a nice 'fade'.
It's still not the even 'dissolve' between two layers that I feel should be possible (but maybe isn't) but it does a pretty good job.
If anybody has any additional tips or suggestions for my workflow (since I basically figured it out by trial and error) I'm definitely open to hear them.