In my neck of the woods, there's a lot of landuse tags that were mapped using closed ways. Since most landuses butt up against something, be it roads, other landuses, or buildings, we ended up with a lot of closely spaced, parallel ways. A while ago I took a shot at merging nodes, accepting that multiple ways would overlap (share nodes). This cleaned up some of the clutter in the database and helped avoid unsightly gaps in the rendering, but was pretty hard to maintain. None of the editors have much support for overlapping ways.

More recently (today!) I tore out a swath of the map and redid it using relations. So far, this seems to be a pretty workable approach. JOSM, at least, seems to have quite good support for working with relations, but I haven't tried to see how manageable they are in Potlatch. No rendering issues, either.

A few random notes and questions:
I did everything as multipolygon relations, using multiple, short ways as outer members. Are there any other 'supported' relation types that I should consider using?

I put landuse tags on the relation, not on its outer members. Doing otherwise would just be missing the point.

I started feeling a lot better about the approach once I started adding barrier=wall and barrier=fence ways. Once those are added to the map, it's very natural to use them as outer members of relations. In cases where there was no physical barrier or road between landuses, I would add a short untagged way. This felt odd the first few times, but I quickly got over it. Once some relations are utilizing an untagged way, it's reason for existing becomes obvious.

If you consider the intersection of Mt. Hermon Road and Scotts Valley Dr. to be the center of town, I've done the SW corner and a little of the NW corner so far (in Scotts Valley, CA, USA).