This seems to be the same problem as when you try to populate an internal TG2 sphere, planet or sun. The population lies like a flat doughnut on the ground, and sometimes, in mid-air. When you attempt a render, items that take this shape when populated just don't show up at all in the render screen.
I've never seen this with an imported object before though, if you manage to fix it, tell us how! The solution may help in a workaround for populating/positioning the TG spheres etc.
Probably not though, since you say this only happens when you populate onto an imported DEM.
Is the DEM converted to the .ter format or is it image based? If it is a .ter, take it into another app' that can open it(e.g. TG 0.9.43 - World Machine - Terrabrush - Etc...) and resave it again. Try using this newly saved .ter instead of the original one, you never know, maybe...
That's the only idea I have without having the .ter/.tgd files to examine.