Not used TED so couldn't say about placing objects around using it. Not sure what you mean by erase or change the current terrain? Terrains are based on a 256 shades of grey. They base the height on the shade, Black being low, white being high (I think off the top of my head lol).
If you make a image in Gimp or similar and make it greyscale you can use that in DB to generate a terrain. Never had much luck playing in paint packages for this sort of thing though. Always relied on finding an editor of some kind.
You will struggle to beat Teds features I would imagine though. You can always look about for another package maybe.
You can always alter the height yourself and play around till it looks right. There are a few peeps who have done this sort of thing on here. Van B being one. Perhaps they may have some ideas.
http://s6.bitefight.org/c.php?uid=103081