That's the way it is. Applies to all DEM terrain tools for Trainz and applies to other main stream rail simulations as well, be it MSTS or Rail Simulator. The only exception I am aware of is the German Zusi. But even there, your track has to have accurate 3D coordinates, proper UTM location and proper elevation. Otherwise DEM terrain, which is added at a later stage there, will not fit.
So, it's mainly a decision to be taken before you start a project in earnest. I have seen a few prototypical projects being abandoned as it turned out that there is no feasible way of automatically adding terrain later.
I have also seen a few projects, particular British ones, that were started in a conventional way, with terrain added manually, often built with the aid of "basemaps" and the convenient 1 km raster of the 1:50k O/S topo maps. At a certain point the route builder decided to go for a more automated method and adopted one of the tools. If built with O/S map north being north on the trainz map, merging two modules should be possible, even if one has been built conventionally and the next one in generated by a tool. A transition area is needed to cope with the slightly different north axis of the O/S grid and the UTM grid.
geophil