By the way, to your statement "I thought the grass would know to avoid coming up through another item.", don't forget that you're not really following the laws of physics in your scene. You're having your stones in the same physical space as the ground. That's impossible in the real world and so, of course grass will also not follow laws of physics either and will penetrate the stones. :-)

My method number 2 above simulates what would happen in real world: in the space where you have stones, you don't have ground.