I would need to see an image or TGD of the specific settings you're using in your heightfield generate, but my guess is you're either confusing the *size in meters* and *size in pixels* fields, or not using one or the other. Admittedly the size in pixels fields are not clearly labeled, but they're the ones next to the "New Heightfield" checkbox. It defaults to 1000x1000, which would be a heightfield 1000 pixels square. This will generate a pretty high resolution file that would not convert to DXF easily. You might want to lower this, or resize in TG Classic before exporting to DXF. I would suggest something like 257x257 or 513x513 (both TG Classic native resolutions).
Below that is the Size in Meters which defaults to 10,000. If you have the New Heightfield box checked, you should see a bounding box for the heightfield in your 3D preview. Adjust the Size in Meters so that it matches the size (and shape) of the terrain you want to export. You may need to reposition it as well, which you can do by clicking on the middle of the bounding box where the axis points cross (it will highlight yellow when you hover over this point, and you'll get axis indicators when it's selected), and then dragging it to where you want it to go. You can of course also specify its position numerically in the shader.
Once it's positioned and sized correctly, and you have determined a reasonable export resolution, Generate Terrain and save as TER again. The resulting TER should load in TG Classic. If not, try creating a new scene in TG2 and using a Heightfield Load to see if the terrain you're generating is actually what you intend. You could also try a 3rd party program like Wilbur (free) or World Machine, which are dedicated heightfield editors.
All that being said, from what I can see here I'm not sure you really need TG2 at all. It seems like you're just using it very simply to convert an image that you have created into a heightfield (TER) format. If that's the case I would strongly suggest either using Wilbur:
http://www.ridgenet.net/~jslayton/software.htmlWhich can natively load many image formats and natively export direct to DXF. There are other dedicated terrain editors that can do the same, but Wilbur is also free. Just File->Open then File->Save As. Possibly much simpler than this workflow you're working on, depending on what you're actually trying to accomplish.
- Oshyan