Hi
I think you will find that whatever your trying to do, others have tried it also, and posted info on the process.
Having said that, it not entirely clear from your post what you want to do.
There are a number of ways to get data into Terragen and use it to form a terrain. The easiest way for someone to help you is to clearly define what your trying to do. What are you attempting to use as a data set?
You can use vectors, you can use elevation data based on real earth terrain, you can use photoshop, it just depends. Please clarify what you want, and how you think it can/should be done.