Hi Composer,

This feature is working as intended, the blue hue is the selection overlay that all game objects get when they are selected. Previously, this feature did not work correctly for terrains.

You should still be able to paint without the selection overlay if you enable the selection interaction mode (1), right click the terrain and click "Deselect All". Then re-enable the terrain paint interaction mode and you should be able to paint without having the terrain selected.