Terragen 2 doesn't support GeoTIFF metadata so if anything it will only be able to read the normal TIFF image data and as such the scaling would have to be applied manually. You would need to derive the proper scaling info from another application which can read it.
We do intend to support more DEM formats in the future, along with basic georeferencing, etc. However this support is a ways off at this point.
If you will be working with GeoTIFFs and other DEM or GIS data frequently and/or it is for a commercial project I highly recommend purchasing a copy of
Global Mapper. It supports the widest format of raster and vector GIS data types for both import and export of any application I'm aware of, much less at its price level (about $280). It's admittedly a little pricey if you're just using it as a converter, but its power and flexibility are well worth it for anyone working seriusly with GIS data.
- Oshyan