Your question - "How far from the ground in Google Earth do I need to be in METERS so that it EQUALS to 512x512 and 1024x1024?"
How high is that? I'm sorry, I have no idea, because in my browser Google Maps doesn't indicate altitude or height above the ground. Maybe it's there somewhere but I haven't seen it.
Anyway, I think the problem is one of scale. I use the maps for creating transfers to set out accurate placement of scenery, roads, buildings, etc as discussed in the steam4me tutorial you linked to. However, it doesn't matter whether you make transfers or terrtex, the problem is the same.
The tutorial you linked to describes a method of scale calculation which I found somewhat complicated and frankly, I think it is wrong, but whatever.
In the route building guide (pdf) by Michael Vone (downloadable from steam4me I think) he explains the tile/terrtex relationship and specifies that each tile is 2.048 km square and so each of the terrtex "patches" are 128 m square. So if you're going to make terrtex ace files, what ever the file size, 128, 256, 512 or 1024 pixels square, relate the pixel size to the distance in metres.
Simply put for 128 x 128, each pixel is equal to 1 metre. For 256 x 256, each pixel is equal to half a metre and so on:
128 x 128, scale is 1 pixel = 1 metre
256 x 256, scale is 1 pixel = 0.5 metre
512 x 512, scale is 1 pixel = 0.25 metre
1024 x 1024, scale is 1 pixel = 0.125 metre
Remember that each of the terrtex patches always equals only 128 metres in the simulator, regardless of ace file size.
The only problem you have now is ascertaining the scale of the Google Map image you are capturing. For this, I use the distance measuring tool available on the application (right click?). If you draw a horizontal or vertical line with the tool, it indicates how long it is as you drag it out. If you use a diagonal line, it won't be as easy to use later in the graphics program. For terrtex files use a distance of 128 metres or a multiple of that to define the scale. It will be visible on the screen capture, so place it somewhere not in the area you want, or you'll have to photoshop it out when you want to use it.
Now once you have the distance/scale on the captured graphic, you can then divide up the area into 128 x 128 m squares, use that grid as your guide to slice squares out to whatever file size you want for the terrtex patches.
I hope you won't be disappointed with the quality of terrtex you get from Google Maps, but I have found, even for transfers, the quality is very poor, colour balance is all over the place and of course, vertical objects, buildings, trees, etc are all flat.
Anyway, good luck, I hope it gives you some clues and I hope it works for you. And I also hope I got the mathematics correct.