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Smoothing tool? There is no such thing, which is a right pain in the rear!
Can i adjust the squares in the middle of a build or do i have to start over from scratch with the 5cm?
Would recommend using Transdem which will give you real world terrain.
This TransDEM is looking very interesting.
A few mountain terrain & texture examples from the recent Brenner route project (Austria/Italy), found on Trainz.de, apparently built with TransDEM:
Forum thread (in German): https://www.trainz.de/forum/thread/171-brennerbahn-beta/
Selected images from that thread:
https://www.trainz.de/attachment/12921-brennerbahn-gossensass-jpg/
https://www.trainz.de/attachment/12924-2018-09-27-114315-jpg/
https://www.trainz.de/attachment/13409-2019-05-08-223616-jpg/
Cannot tell you more about the route and the technologies applied (I do have my guesses, though), please contact the author Barney01.