Thank you Ami. With little help from another forum member, I found the solution. But it is interesting anyway. See the picture, with the diagram on the left (the solution) I get the noise at low altitude only - which is what I wanted.

With my original idea - in basic form on the right - I get nothing (cracks appear everywhere, or nowhere). Yet this came basically from following the manual, i.e. just linking the blender ratio between noise and terrain to the altitude. It should have worked (?).

If you have a different solution to the one on the left you're very welcome to post it :)

I believe that these extra steps in getting a more realistic terrain are worth the effort and will pay in realism, rather then going through materials with the more usual bump or displacement maps.