I purchased/downloaded the software this past Sunday and was able to successfully imported the route into surveyor and run the route in driver that same evening. I will not say that it was simple, but all of my questions were answered in the included documentation, and had I bothered to read through them first I would probably have had fewer issues. It's not software you'll pick up and use easily right away, but neither was trainz. The first DEM is hard- all the rest are cake. Here's a quick survey of my process:
1) get the DEM: Since I'm here in the States, I use the National Map Seamless server. Click on the map on the main page and you'll get a viewer page with tools on the left. Under "downloads" you can select a tool that allows you to highlight an area by drawing a rectangle over your area of interest. This brings up a download dialog and here comes my first piece of advice- Select "modify data request" at the top of the download dialog and change the data format to GeoTIFF (it defaults to ArcGrid). This file is directly readable by Transdem. You could export this from Transdem right into Trainz if you wanted- instant ground work!
2) get the raster map overlay: Transdem can work as a web map service client, so it will get the rasters for you. Dr Ziegler includes an XML with the specs on many free mapping service providers- terraserver and topo-somethign for the US. I checked around the internet and found additional ones- I'm sure the state of PA has some. Internet search on Pennsylvania web map service. Anyway- zoom in on part of your DEM where you want a raster map- a topo, or an ortho, or whatever. Bring up the web mapping service dialog, connect with the server you want, and hit get map. Using the web mapping service means you can by-pass the whole geo-referencing bit, which does look like a hassle (this seems to be the process where you have to tell transdem the coordinates of a map you provide- like something you'd scan in)
3) lay out your route. If you are prototyping an existing route- something current- then getting an overlay with the tracks showing should be easy. There's a simple route editor built into Transdem- works a lot like the track tool in Trainz. You could do this step in Trains, but I found it easier to do in Transdem
4) export your dem to trainz. I fell down several times on this step. The instructions were written for trainz 2009 (help files for the trainz portion of transdem are separate from the regular help file, btw)- I was able to get the DEM and the overlay in one step per program- export from transdem and then import the folder in content manager for trainz 2010.
5) export your route. this is an additional step beyond exporting the DEM. You can even select which track kuid you want it to use.
6) open in surveyor. Once you're done using your raster overlay, you'll just paint over it with in-game textures. If you use an ortho, then you can place game buildings directly over satellite image buildings.
here's a quick video of what I've done- I'm spending my time now downloading more raster maps and expanding my dems:
http://www.flickr.com/photos/devandavis/4401149211/
final thought- it takes some effort, but what worthwhile thing doesn't?