It's nice to have access to real world data, but there are a couple of issues here.
First of all, 3DEM is not necessary, Terragen 3 loads .HGT data natively just fine. So if you use this data, skip the conversion step, it'll be more accurate and faster.
Second, the actual data is quite low resolution. For the US, 10 meter per pixel data is widely available (at least 10 times more detailed than the HGTs linked above), and in some cases 3m data is even available. For US data, you can download any part of the country in high detail elevation, orthoimagery, and more here:
http://viewer.nationalmap.gov/viewer/For International data at 30m (still more accurate than the HGTs), you can get data here:
http://earthexplorer.usgs.gov/You want to go to the Data Sets tab, then to Digital Elevation and check "SRTM Void Filled" (the non-void filled will work too, but you'll want to fill "nodata" in Terragen with something).
That should give you easier access to some higher quality data.
- Oshyan