I've recently become fascinated by the things that can be done with procedurally terrain and have started experimenting with world building a bit. I'd like to be able to make worlds something like Dwarf fortress with biomes created from meshing together various maps.

So first step has been done. Using the diamond-square algorithm I've created some nice hieghtmaps. Next step is I would like to add some water features and have them somewhat realistically generated with rainfall. I've read about a few different approaches such as starting at the high points of the map, and "stepping" down to the lowest neighboring point, pooling/eroding as it works its way down to sea level.

Are there any documented algorithms with this or are they more off the cuff?

Would love any advice/thoughts.