the "import 3ds as ground mesh" dont work well.
when i tried to use it , had the same problem , had a flat square
for make ground with greyscale bmp ; you can directly in oz.
a) make a bmp 64x64 in 256 greyscale (white is up an black is down)
b)check the "use BMP heightmap" in the create zone windows
for make the bmp map you can use some software like terragen, bu personally
i prefer make a very basiq img like this
and work on it with oz after
for sample the river on my zone after directly with ground funtions on groud menu