I finally figured out how to use the Enter key to select a level in the Terrain tools. But I can only get flat levels one full block above or below the next with a sloped (45°?) between levels. This results in terraced "steps". I wish there was an option for creating more natural slopes in 1–5 degree increments, something closer to what a walk or roadway might use. So the level grid tool with say an option key for degree of slope. 
Natural slope terrain tool
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Unfortunately the only way I found now is the tedious way of adding dirt and rake add rake repeat
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i think that what OP is observing is how terrain data is stored in a block-like grid. Im sure there might be a good technical solution to this problem either in how the data is stored or rendered so the ground looks less stepped and more natural. Red would have to answer this regarding what long term changes would be to how the world data is stored and rendered.
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