Placing and Connecting Roads:
When you click on the road placement and editing tools option, a menu will pop up on the left side of the Create a World Tool. In this menu there are five buttons near the top, to let you create sidewalks, roads, intersections, and to create a custom road. For now, don't worry about making custom roads. Practice with the default road until you know what roads look like when connected.
Roads are placed in segments, each segment has two end points, and an angle controller at each end. As soon as you click the place road button, the next place you click in the render window will be the starting point of a road. Drag it to about where you want to end the road segment, and click again. You don't have to worry about making the road exactly right at this point. At this point one road segment will be created, and you can expand the road with more segments. If you don't want to expand that road any more, hit escape once.
Using more road segments gives you more control over the curve of the road. To move the edges of a segment, click and drag the small box on the end you want to move. The small box connected to the center edge by a line is the angle controller. Drag it around the edge to control the angle of the road on that side, and drag it closer and further from the edge to control how far the turn extends from the edge. Once a road segment is attached to another, the lines and boxes on that end will become light blue instead of green. When this happens, you won't be able to adjust the angle of the connected side as much.
Intersections must be placed at the end of each road in addition to anywhere two separate roads connect. To add an intersection, place it near the road segment you want to attach it to. Then rotate the intersection so the edges are close to parallel with the edge of the road segment, and drag it to the end. The box in the center of the intersection should turn light blue, and the side connected to the road segment should change in appearance.
If you want more precise control over where you put your roads, turn off snap to grid mode. But if you want to see how much of your road is straight, or gauge the curve of the road, turn on snap to grid mode.
Placing sidewalks works similarly to placing roads. You need intersections at the end as well as where multiple sidewalks connect. However, to connect sidewalks to roads you just need to make the end of the sidewalk touch the sidewalk on the road.
When you click on 'create custom road', a new window will appear. You will need to select or make textures for each part of the road and sidewalk set. The street textures include a base, what the road will be made of, and a detail texture, which in the default road includes the lane lines. You can have no detail, but you will need to upload a blank image. The sidewalk textures include a base, which is the material the sidewalk is made out of. It also needs a normal and opacity map. The normal map and opacity map. A normal map is used to fake a three dimensional look, while the opacity map controls where the sidewalk texture is visible and by how much. Intersection textures include the corners of the sidewalk and the crosswalk texture. The corner has a base texture and another normal map. The crosswalk texture will show up where a road meets an intersection. The CAW tool starts off with only a few terrain paints, enough to make dirt roads, stone roads, and asphalt roads. To make roads similar to what you find in expansion towns, you will need to extract or download those textures. You can download a collection of all expansion road textures (and terrain paints) here.
Once you have placed the roads, they might be bumpy, or change angle suddenly. If you use the smooth terrain option to fix this, the roads will flicker, occasionally showing the ground underneath. To fix this issue, click on the other road option in the terrain menu. There will be 3 options: Smooth Road, Flatten Road, and Restrict Road Grade.
Smooth road smooths out bumps in the road, either one segment at a time or in all connected segments. Click on the road or segment you want to smooth until it is smooth enough. The edge parameters controls how far beyond the road the smoothing extends. There is also a "sculpt surrounding terrain" option, which makes the edge of the smoothing blend with the outside terrain. This is by default off, and will switch back to off every time you leave the menu. Make sure the sculpt surrounding terrain feature is on the right setting before using it.
Road grading makes an even slope in the road. Input the number of square you want the slope to last in the "restrict grade" box. But if at any time there is no number in that box, CAW will throw up an error message and revert to the last digit that was present. Just put in the number you want and then delete the 1 in the box to avoid this. Then click on the segment you want graded.
Kkrank has an article on creating roads in more detail, including more information on customizing roads.