Therefore it’s probably better to bake everything to a single texture image and projection using Render Map before exporting.
Ouch. You’d either end up with a huge texture map or huge texture pixels. Baking is simply not feasible for an environment.
break up the mesh using clusters, texturing each cluster piece. How do you do that? I can create clusters but I’m not sure how to go ahead and assign a material/image to each one.
The question i would be asking myself is not how, but rather "can i do that?". Many engines support multiple materials per mesh on export, and these get treated as separate batches during frame render.
However i would check with the torque manual beforehand and do some tests to see if the asset exporter supports softimage clusters and multiple materials. (I think torque uses COLLADA). I’m willing to bet it does, but a quick test with a cube and two or three materials would answer that quickly. I would also do a test to see what happens when i have a material applied to the object AND a material applied via cluster.