Will
I frequently generate WPS tiles using high-resolution gridded data. By far the easiest way to accomplish this is using the GIS4WRF plugin for QGIS. You can bring in any raster dataset and use the GIS4WRF plugin to generate WPS tiles from a layer in your project. This utility will create all the tiles you need as well as the index file for WPS. You may need to edit some of the metadata in the index file, but I have found it to work well.
If you want to create WPS tiles manually, you can create a single-tile WPS binary dataset using gdal_translate.exe. Look at the WPS user guide, section titled "Creating an Urban Fraction Field from NLCD Data" here:
If your grid is too large (>99,999 x 99,999), you may need to resample the data before building the WPS tiles.
Here are some other resources:
Good luck,
Kevin