As the title states, when using the built-in terrain tool in its cylindrical form, it doesn’t appear to create terrain at the full height; only within the area of a 1x1x1 space. It doesn’t matter what material it is, what height it is, it only ever fills the 1^3 area.
It seems to always happen upon opening Studio. In any place.
Update: it only happens when Base Size is at 1, anything above that seems to work fine.