Boolean difference between the plain and say a cube should work. Your basically making a hole in the plain so the stuff under it will show threw. As for the blending part. I wouldn't do it that way I'd make a new bigger hill sorta terrain. Like your so close there you got no room. Make the ground of the pit extend a few miles then you will not have to blend it with the infinite plain. Obviously you can't do that so make a new terrain same material then use the cube idea to boolean the hole in it. The infinite plain will be so far in the distance you will not be able to see where they meet. Make sence? There is other ways and that's blend the material of the plain with the small hill you got there by altitude but it's harder to work with. You don't have a lot of altitude to work with there.