Uh, fingers faster than brain. You can always use Transparency option in the Materials to create a hole in the terrain. I'm not at my Bryce at the moment, so I cannot demonstrate, but it's the same as the thing I did in my "W at the end of P" image. And I suppose that you can always load the transparency picture in the middle box in Picture dialog in TE. Also, would have to check.

-- erlik