Calstock,
What you have here might be a question of selection. You have to select only the right parts of your terrain to make it reeditable in your process.
What you should add to your workflow is that you should soften/smooth all terrain edges before draping. After that, just find your own methods of selection of draped curves, so you don't destroy original terrain info. The plugin that helps me the most with terrain curves is select curve from Thomthom
Most importantly, if you have to reshape a complex mesh or erase something to create holes, don't do it!!! Hide stuff, group it, copy it, "backup" it, make component and "save as" external file. Any method is good but erase and loose all those hard to remake polygons.
If you don't think this as anything to do with what you want... watch the video:
http://screencast.com/t/ADucyyw1
I hope this helps,
JQL