Yes, it really IS that ugly on the surface haha!
I've never had success creating a 16bit height map with Irfanview. I probably wasn't importing the greyscale 16bit PNG properly. I did manage to make one just today, finally, with ImageJ, a free java program that can edit and convert a 16bit PNG to RAW, then I just use CubeMap with the right input/output settings.
Does it help to use 16bit images for the surface textures too? I'm guessing the extra bits are only used for height data though.












