Could you provide us with the jpg maybe? So that we can have a look how it is done. I made a quick and dirty test with a standard terrain (256x256) and a jpg as picture. 2048x2048 NOT 16 bit.

I attach the result - colored gray (plain) to see what is material and what geometry.

If you want me to, I can add the jpg I used here as well.

One day your ship comes in - but you're at the airport.