I fail to see the problem here.
If the file is in the wrong format for Bryce, convert it; or use a program that supports the file format in the first place. It's like trying to open a .jpg with Notepad then complaining because Notepad doesn't support .jpg files.

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Step by Step Terrain Export Instructions:

1. File -> Export Object.
   If that's not working for you, then there is something wrong w/ a) your computer or b) your Bryce install. I'm no tech support person, if that isn't working I don't what to tell you...
   Maybe try some other 3D landscape program?

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I've never had any trouble w/ 'chia pets' either. I use DEMs in Bryce, Carrara, and Terragen.
I'd guess that either your DEMs suck (resolution wise) or you are adding too much height.
DEMs are, of course, scaled and if you change the scaling ratios too much, then there is problems...
This one is scaled to 3 times the height it should be. You can see the pixels starting to bump out down on the bottom, where it is close to the camera. If I were to scale to, say 30 times, it's right height, then it would look like a chia pet, I suppose.

Friends don't let friends use booleans.