The bid by Inverness and the Highlands to become the European Capital of Culture 2008 raised eyebrows among some citizens of Edinburgh and Glasgow, rival hubs of Scotland's central belt.

Glasgow had held the title in 1990, a year that brought tremendous social and economic benefits, along with a host of cultural accolades; Edinburgh has a well-established cultural profile, largely bestowed by its flourishing roster of festivals.

But Highlanders had long been characterised as unsophisticated country cousins, with little culture beyond epic scenery, gory history and a fertile traditional music scene.

'I think there's a perception that the culture of the Highlands is very much rooted in the past,' admits Graham Watson, the community development manager for the Highland Council, which assembled the bid in partnership with Highlands and Islands Enterprise, which supports business in the region.

'But the Highlands is also a place where cutting-edge industry and cutting-edge culture is happening. There's a huge amount of change going on.' The Inverness area, he points out, has one of the fastest-growing populations in Europe - although Scotland's population as a whole is in decline.

When Liverpool won the Capital of Culture bid for 2008, a new initiative prevented Highlanders from crying into their beer. 'An awful lot of work had gone into the bid,' explains Watson, 'and on the basis of that, [Scotland's first minister] Jack McConnell decided that 2007 would be a year when Scotland celebrates Highland culture.' With the Scottish Executive on board as a third principal funding partner, the plans took shape.

The result is a huge programme of cultural events and developments under the umbrella title Highland 2007. About £50m is being invested to create the festival and the infrastructure to support it. The most recent announcement in early February saw the Scottish Arts Council commit £750,000 to support arts programmes with a Highland 2007 theme.

The objectives are laid out formally in a policy document, but Watson summarises them in simple terms: 'The goals are twofold. It's about repositioning the Highlands as a happening place to live and work; and it's also about celebrating the change that's going on here.'

The board is made up of representatives of the funding agencies, tourism, the arts, academia and EventScotland - the agency created in 2003 by the Scottish Executive to attract and support major events in the country.

Watson - who began his career in museums in Lancaster - rejects any suggestion of a lack of museum expertise, explaining that the sector is represented in the advisory panel working alongside the board.

The programme is divided into three strands: international events, regional events, and a sprawling community programme, whose many tentacles reflect the scale and diversity of the 15,000 sq mile Highland region.

The international strand includes the World Mountain Biking Championships and Highland Quest, a competition backed by theatre impresario Cameron Mackintosh to find and stage a new Scottish musical.

There are also more predictable events such as the European Pipe Band Championships, the World Championship Highland Games and the Royal National Mod - an annual competition-based festival of Gaelic culture.

Also receiving top billing is a major, 150 sq metre touring exhibition called Fonn 's Duthchas. The Gaelic name - which translates as Land and Heritage - is significant, because language is an important strand of the festival.

In response to fears that the Scottish form of the language was dying out, the Gaelic Bill was introduced in the Scottish Parliament and became law in April 2005. Gaelic is now an officially recognised language in Scotland, and a quango, the Bòrd na Gàidhlig (Gaelic board) has been created to promote and secure its status.

Though sparsely spoken in the south and east, Gaelic was once the dominant language in the northern and western regions of Scotland. Highland 2007 provides a natural opportunity to boost its prominence. 'Using this opportunity to get a greater understanding, greater knowledge and greater use of Gaelic is an important objective,' says Watson.

Commissioned by the Scottish Executive with a budget of £402,000, Fonn 's Duthchas is a collaboration between the National Museums of Scotland, the National Galleries of Scotland and the National Library of Scotland. It will open in Inverness, then tour to Edinburgh, Glasgow and Stornoway on the Isle of Lewis. (A smaller satellite exhibition is also planned, visiting up to six further venues.)

The project manager is Maureen Barrie, the exhibitions officer for the National Museums of Scotland. This unusual collaboration between three national, Edinburgh-based institutions will also encourage input from Highland organisations.

'It's a chance to work up there and form partnerships,' says Barrie. 'I was involved in a loan scheme in the Highlands and Islands for four years and it was one of the most fruitful and productive periods of my career.'

Plans are embryonic, but the selection of objects began in January and already some themes have been determined. 'We'll be looking at language, music, history, geology, emigration, living by land and sea - and also myths about the Highlands,' says Barrie.

'People think about the Highlands in terms of tartan and heather and so on. These things work very well as iconic frames of reference - and it is a fantastic, unique heritage. But we want to get beyond that and show people what's happening in the region today.'

One key idea on the drawing board is a high-tech entrance section celebrating the Silicon Glen - the Highlands as a centre for digital technology. 'This the key thing,' says Barrie. 'Historically, it was not an isolated area. It was densely populated, it had huge contacts with other countries, wonderful trade links and so on. And today it's still very connected, but in a technological way.'

Fonn 's Duthchas is to open in January 2007 at the Inverness Museum and Art Gallery, which by then will have received a £960,000 makeover. This will include a new entrance, new displays, an upgraded cafe and a full overhaul of visitor facilities.

A large proportion of the festival's budget is dedicated to upgrades of this kind. Another major redevelopment is the battlefield at Culloden, where the last hopes of the Jacobean rising were crushed when English troops defeated forces loyal to Bonnie Prince Charlie in 1746.

Owned and managed by the National Trust for Scotland, Culloden will see two main changes, with a budget of £8m (of which £3.75m was provided by the Scottish Executive and a further £2.3m by the European Regional Development Fund). The existing visitor centre, which dates from 1984, is to be replaced by a new building, designed by Gareth Hoskins Architects of Glasgow.

Meanwhile, the battlefield is to be reinterpreted by the London office of Ralph Appelbaum Associates, the exhibition designer whose past projects include the US Holocaust Memorial Museum in Washington DC and the Civil War Visitor Center in Richmond, Virginia.

Other significant schemes include a major revamp for the Highland Folk Museum in Kingussie, Inverness-shire; and an interpretative visitor centre for the UK Atomic Energy Authority's plant at Dounreay, Caithness, a key feature of the region's social history.

But in serving such a widely dispersed populace, the organisers of Highland 2007 have dedicated much consideration - and a budget of about £3m - to community projects around the region.

One beneficiary of this is the Timespan art gallery and museum at Helmsdale in Sutherland, which has received £30,000 from the Highland Council towards a major refurbishment, which includes the creation of new meeting, research and workshop facilities, a storytelling room and a geology garden.

The community archive has been transferred to Adlib software and can now by viewed by visitors. Practical help can be as valuable as funding, says Rachel Skene, the director of Timespan: 'Support needs to be offered to those who may not have the experience. Genealogy is an area we hope to develop, and our archive manager is receiving training from Highland Council archivists.'

In Caithness, the Dunbeath Preservation Trust has received a grant of £2,500 for the preservation and presentation of an extraordinary local artefact. The Portormin runestone is a slab of sandstone, carved with eight runic characters. Revealingly, the four local schoolchildren who discovered it in 1996 were able to identify and interpret five of them (Viking studies feature on their primary curriculum).

Nan Bethune, the chair of the trust, believes the stone provides a focal point for an understanding of the Highlands' diversity. 'Caithness was a frontier land between the Scandinavians, the Northern Kingdom and the emerging Scottish crown,' she says. 'We are not like the rest of the Highlands; we have a very distinctive history and prehistory and we have a unique story to tell.'

A further grant of £3,500 will enable Dunbeath's facilities to be made more secure, allowing precious items excavated locally to be borrowed back from the National Museums of Scotland, leading to a major exhibition in 2007. 'I believe in working through partnership,' says Bethune.

'It's a way for the big central institutions to demonstrate that their collection is still relevant today in the areas from which they came; but they need us to work with them to provide the facilities required.'

Underlining the significance of diversity, facilities of an altogether different kind are being developed at Staffin on the Isle of Skye, with funding from a range of sources totalling £199,500.

The Staffin Ecomuseum is a network of paths and interpretation, providing access to the local area. Three existing buildings will house most of the interpretative material, including an interactive 3D digital map (developed under a separate project), but the primary exhibition space is the open air.

Meike Schmidt job-shares a post as project officer with local man Dugald Ross (developer of the original Staffin Museum). 'The idea is to open up sites of natural, historical and cultural interest in the landscape - to residents and visitors,' explains Schmidt. 'People in Staffin know what's there, they're full of stories and songs, but they wouldn't necessarily go out and promote it to visitors.'

Like most of these projects, Staffin will have a life well beyond 2007; indeed legacy is a keyword in the Highlands festival's overall strategy. Several building projects are devised with an eye to future benefits, among them the Highland Folk Museum. The city may also get a new archive centre and a second art gallery and museum.

'We're certainly hopeful that this is something that will invest in the future of the Highlands,' says Watson. 'It's not just a one-off year; it's something that will have long-term benefits and returns.'

Andrew Burnet is a freelance journalist and editor based in Edinburgh