Hi Jim,
The main taks when working with CityEngine is to produce 3d Models procedurally. CE ist a 'procedural modeling application'.
CityEngine is NOT a visualization tool.
The terrain modeling features are still limited in CityEngine, we know. Currently, the way described is the best workflow.
-> Align Shapes to Terrain
then
-> Align Terrain to Shapes
Maybe try to increase the U and V subdivisions of the terrain. For this, select the terrain layer and check the Inspector.
Ok ?