Truly rugged terrain requires higher resolution mesh files than those provided for most of the areas in Flight Simulator. It also require modification of the cfg setting,
or you will not see all of the additional detail. (Of course, there is a cost in performance.)
You may want to test this setting in the Grand Canyon area, where even the default mesh seems to be of higher resolution.
This data was only 30 meter source resolution, at LOD12 (9.6 meter). This oversampling may explain the artifact, but was necessary for the small test area used.
This SDK says the sim can support resolutions up to 1.2 meters! I do not think current hardware can, but when data and hardware become available...