While we're on the subject of heightmap editing.. does anyone know the best way to manually edit a generated .bmp from TESannwyn? I tried modifying one in photoshop (adding together solstheim and vvardenfell landmasses) by using the eyedropper to get the 'deep sea' colour that TESannwyn generated and filling in the gaps with that.. but in my mod I got crazy giant walls all round the mod, and an awful lof of landscape errors too. I'm assuming there's a specific mode/way in which to edit a 16bit bmp generated by TESannywn as well as specific save settings. Obviously in my case something's going awry during the image editing process.
The gaps you are talking about, are they white? Have you exported the map without raising the height? For the Oblivion.esm I have to raise the height by putting -h 8192 into the commandline for TESAnnwyn, Morrowind should be no different. The exported map should be almost completly black, then you raise the brightness two times by 150 to be able to edit it properly. When you're done, you lower the brightness again by the same values. Don't forget to make use of blurring filter to soften cliff walls, but of course not for the complete map.
Take a look into the TESAnnwyn readme for this too.
Here's my RAW export setting for Oblivion.esm:
TESAnnwyn -p 1 -b 16 -h 8192 -w Tamriel Oblivion.esm
I use RAW rather than BMP, but both should work. But are you sure your BMP edited and saved with Photoshop was 16bit greyscale in the end?