I am having the same issue. I have spent hours trying to figure it out and over a month researching it and I can't find anything. It is strange that this problem hasn't been resolved due to the fact it is a complete roadblock to using the terrain editing feature. If I come up with anything I will post it here.
My solution is to backup after every hour of work, and then keep at least 5 or so backups at any given time.
