I can't speak for png, those are compressed, but for .raw files, yes. I think it's the compression that kills it, either going from 16 to 8 bit, or straight up using a compressed file like a .png.
The game supports/supported .tga's, which had an option to NOT be compressed, but I don't know crap about file formats but I don't think .png is lossless.
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Looking at your pics, you're doing biomes, which CAN be compressed, so the "steps" should have nothing to do with that. Only the dtm.raw (the actual height map) would cause that as far as I know.
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You're in uncharted territory, my friend; I think you're on your own. =)