Hi coremuzo,
It's worth remembering that you can't edit HD terrain in Surveyor classic, it has to be edited in Surveyor 2.0. Attempting to edit it in classic (either with the ground tools or by attempting to smooth the ground under a spline/track etc.) will give you the error message you received.
S2.0 is a much more refined tool and, while it does have a learning curve like any software, I have found it to be absolutely fantastic to be able to edit the terrain in 12.5cm sections. Trainz terrain has never looked so realistic!
Cheers,
PLP