Yes, exactly. You can always add to the GE terrain (although you may risk your model being rejected if you do this too excessively) but cannot "subtract" from the terrain. Or you can but as the GE terrain will be inevitably above it, you won't be able to see it.
So the workaround is to add to your terrain, paint it with the colour GE snapshot and subtract from that piece down to the limit of the original terrain.