Yes, it really IS that ugly on the surface haha!
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.
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