Well I got stuck with exactly the same map/terrain so I can share some thoughts...
Yes the coast of my country is made of 1185 islands and as you describe often very steep elevation transition, my plan was to edit the hfd after tiling...
Some say before tiling some after tiling, this feature will cut out the coast and clearly define it. It basically removes "sea mountains"...
This is exactly why I prefer to do it after tiling as if you do it that way you preserve the original coast shapes but you still nicely avoid "sea mountains" :)
Well if it's really F'ed up then there's no cure but manual :(
Anyway man I have loads of materials for that terrain, finished city/airfields list, and a buttload of new custom high res(even 1024 available) photorealistic tiles.
The reason I gave up on it was me making it too ambitious, I have separate tiles for mainland, mainland forrest,mountains, another mainland for variety, then greece, greece mountains, Italy, Italy forrest/mountains etc...
I realized I can never finish that monster alone even without the targets and trees/objects...
All in all, if you need anything or want to use something just say ;-)