Using the same LiDAR DEM from which we generated the contours, we can create hillshade tifs using  http://www.perrygeo.net/wordpress/?p=7.  It compiles easily on a mac, probably even easier on a Linux machine following his directions.  Then another simple loop:

#!/bin/bash
x=0
for f in $( ls *.txt); do
 x=`expr $x + 1`
 echo $x $f
 hillshade $f $f.tif
done

I’d like this all in a single tif:

gdal_merge.py *.tif

or in my case with such a large area:

gdal_merge.py -co "BIGTIFF=YES" *.tif

Then overviews:

gdaladdo -r average out.tif 2 4 8 16 32 64 128 256 512 1024