If I had to do it, I would:
Draw my rolling hills inside a group, totally separate from the city grid. Then I'd move it directly underneath the city. Then I would drape the city roads onto the terrain. Do this part in small increments as it is quite likely it will crash sketchup a lot. So grab about a blow worth of the city terrain and drape it. If it doesn't crash, save the file, then move on to the next block. If it does crash, open the model and try doing only half the block. Then once all the roads and parcels are draped, I would use drop.rb from http://www.smustard.com to drop all the building straight down onto the terrain. Many will end up with corners showing above the terrain, so then move them down the rest of the way until they are entirely hidden. This will not work as easily as I describe if your buildings have entry doors and such as they could end up partially buried.Anyhow, that's how I do it. Good luck!
Chris