Make sure the canvas size is 513x513pixels and that the colours are exactly Red (255, 0, 0), Green (0, 255, 0) & Blue (0, 0, 255). This is important. Also keep in mind to use ONE layer, or merge the layers together once you're done. This file also must be a .png file so don't forget that important detail ^^
Oh, my apologies. Well, either way, without the RGB it would have been valid help for Height maps. You said terrain so I thought you meant terrain, dear. ^^
Oh well. Glad things are working now, will be locking this!