I like the idea of building a grid based on points of interest, not geographical locations. When helping construct BITN's Grid, we basically reviewed the area (admittedly large) and found the sites/towns that were interesting, and put those into the game. I then compiled a spreadsheet of all the different sites, and listed out a "type" for them, and reviewed that list to make sure I had "something for everyone". Poor area, rich area, wild area, commercial area, etc. From there, we had players requesting additional areas, and I believe it worked pretty well.
The grid became more about what was conducive to play than what was realistic. You'd skip a dozen towns/places/areas going from point A to point B, but there was very little value in that. I like to think of it a bit more like Baldur's Gate's map, rather than a logical map of the city. Skip over a few miles, cause they're boring (or more likely, redundant).
So, maybe shoot for 5-10 neighborhoods (those are your "grid squares"), and then shoot for a few locations within each. Assuming, of course, your game works like that!
More practically, use tools to build your grid! For individual rooms (and/or small builds), I have a tool, here: http://musoapbox.net/topic/850/a-tool-for-grid-building-digging
For doing big areas at once, use MUSHroom: http://mushcode.com/MushRoom
If you'd like any advice on either, feel free to give me a poke. Just a TOW BIG WARNINGS on MUSHroom: if you choose to start from the current room instead of a new room, it will overwrite your current room and if you create a big space in MUSHroom, you will eat up your input buffer. Break it down to sending 30-50 lines at once, otherwise you'll end up unsure where it cut off.
Cheers!