Okay I managed to get the mask to work just fine with the one you posted and a remake I made that looks almost identical to yours. However, when I tried making a version of your terrain, it managed to crash every time, even with a remake I used, both sharp and with a blur:
(https://i.imgur.com/XylzZD2.png)
I checked out Feralheart's log file each time and received this error each time:
Capabilities:: VertexProgram: YES
Capabilities:: FragmentProgram: YES
Sound:: Initialized: YES
ERROR::SaveFile:loadz: WaterMillGates.cfg failed!
And I also checked out the application crash log in Windows Event Viewer but nothing there was too helpful for figuring the issue out. I initially thought it would be an issue with the terrain map being very complex but it is not by any means and should be loading just fine if everything is done correctly. Have you recently had issues making other terrain maps? I'm honestly not to sure why it keeps crashing, maybe someone else will have some ideas.
I recommend to use GIMP for make map, since it secures you the flayer is GREYSCALE (check it) - It happened to me recently, It worked for me when I downloaded a flat heightmap, http://www.mediafire.com/file/ausqlcih5y3qd3v/TestHeightmap.jpg (http://www.mediafire.com/file/ausqlcih5y3qd3v/TestHeightmap.jpg), and opened it.
Then I copied the layer of my heigh map and copied in the same layer, remplacing it [if you are on gimp]. Then I changed the name, exporting it as .png
Tell me if something advanced, thanks.