See blog post https://www.blogger.com/blog/posts/8863246996882687669 for a longer write up. tl;dr version is...

The terrrain files produced by the SL server when exporting terrain are not properly encoding the height, resulting in coarse quantised terrain.

It would appear to choose to encode only the height value (R channel) leaving the G channel untouched. This means that the resolution of the land exported is limited to whatever value happened to be in the G channel at the time of creation/import.

Untested repro steps, as I have no access to SL regions with terrain rights.

My terrain tools should be usable but they do try to minimise the G value for any given height.

The attached 20m-Q4 file is encoded to R=80, G=32, meaning that the minimum G step is in their 1/4 metre, so it should still be visible with a sharp gradient.

1 start with an empty region

2 load a flat terrain RAW file, if possible use one with a G channel suitably high to demonstrate the issue, 120 would be a good starting point.

3 in SL manipulate the terrain using the inworld tools, adjus the strength of the tools.

4 create a mount with a slow smoother gradient that is shallow enough and wide enough that the stepping should be obvious.

For a G value of 120 a smooth mound of diamater 10m and height 10m should give ample evidence

5 see the smooth land in SL

6 bake and export

7 re-import

explected results a stepped pyramid instead of a smooth mound.