This is just mesh... it does not change the coastlines. It should be compatible with any other addon.
The DEM5 files should be copied right into the C:\Program Files\Microsoft Games\Combat Flight Simulator 2\SCENEDB\world\scenery folder. You can overwrite the default files as these are better... based on newer SRTM data.
The other files can be placed into scenery folders, and activated as any other scenery. I have folders named DEMLOD7 and DEMLOD8... and these have scenery and texture subfolders, with the texture folder empty and the scenery folder with the corresponding mesh files. In CFS2's Scenery Library, I move them down the list as far as possible, so other files will lay over them.
There are areas of the sim that already have mesh of greater resolution than these files... but they are not more accurate. In fact, the default mesh files are in error in some areas. That's because they use data created before the availability of SRTM data.
If you are willing, and after you install the LOD7 and LOD8 mesh, you could inactivate the default hi-res mesh. This is best done by renaming the filename extension from .bgl to .old
Search the C:\Program Files\Microsoft Games\Combat Flight Simulator 2\SCENEDB\world\scenery folder for the files ending in ?????9.bgl, and change that to ?????9.old, and they are deactivated. The '9' means they are LOD9 mesh.
With the new mesh installed and the old mesh replaced or deactivated, you have the most current mesh available through LOD8 that you can get.
There are commercial mesh sets that may be better than this freeware mesh, such as Justin Tyme's FSGenesis mesh. That's because Justin was financially able to spend the time to correct mesh errors in his sets, and had lots of customer reports that he could followup. Justin's complete mesh set for FS2004 and earlier is about $60. For $16, you can get his world LOD7 and LOD8. Installation would be the same as what I described above.
Google FS2004 mesh and you'll see what's available.
AVSIM might have good LOD9 -> LOD11 mesh available. There are probably other sets out the, both freeware and commercial. I would advise against using the Simviation mesh sets. They are the reason I made these available. For optimum performance CFS2 needs LOD7, and high-end machines can use LOD8. LOD9 and over is too FPS intensive. The simviation mesh has glaring errors in every file, and should not be used.
Dick