Hi Oshyan,
I will assemble a test package for you to try out soon. I can duplicate the issue, and take screen shots. I can also share the tgd & tiff files with you to test. It will be quite large though because of the 40x Tiff. Should I send you a Dropbox link by email, or post the link here? I'm on the latest "frontier build" by the way.
The heightfield is a single Tiff I assembled from 3 DEMs I downloaded from the USGS site. I converted the IMG files using GDAL to 32-bit tiff files, and then in Photoshop downsampled to 16-Bit using HDR Toning. I toned each of the three tiff files exactly the same way so that they would blend together nicely. I combined them into one file which at this point was about 20k square, then I doubled the resolution to 40k before bringing the heightfield into World Machine for erosion. So the heightfield went through many steps, but the final result was an export of a Tiff from World Machine.
Thanks,
Derek