CS has different functionalities for LOD management that can be used for this.
The most useful feature for you is probably the imposter system. It allows you to replace meshes that are far away with a 2D image generated automatically. I guess it can be very appropriate for a space scene, to display things such as planets or asteroid fields. It is really easy to use, you can have a look at the "imptest" application to see how it works.
There is also a static LOD system. It can be used to define different models at different resolution for a same mesh. See the iLODControl and the LOD methods in iMeshWrapper.
Finally, there is currently a GSOC about the implementation of a progressive LOD system based on sliding windows. It would allow to generate automatically new LODs and to switch between them at no cost.
Outside CS, you may be interested by libnoise, a library to generate coherent noise (e.g. the Perlin noise), it can be used to generate on-the-fly planets, terrains or spacial backgrounds: http://libnoise.sourceforge.net/