As I've said before, you only use a specific tool/ feature when you need it, you won't find any predefined workflow as there is no such thing, it isn't even necessary. Just start with a gameplay prototype (using a simple WED level and SED) and then you decide what you want to create next, your ideas and your mind dictate what tool is to be used next.
IMO the terrain generation is in fact a little problematic with GStudio, but you can try the following approach: Open the painting program of your choice, draw a heightmap where black is the lowest and white is the highest point. Then choose a multitexturing terrain shader (there's a list of available shaders in the manual) and create the appropriate blend map (this depends on the shader). Now import the heightmap in MED and make some adjustments, if necessary. Add the terrain in WED and assign the material/ action (f.i. from mtlFX.c).
n MED you create or import your models, your player figure, enemies, other animated stuff, detailed objects and the like. When you come to a point in your level where you say: "I need a terrain, now!", you can start MED and create a terrain there, too, manually or via a heightmap. The advantage of a heightmap is that you can create your blendmap in a painting program, too, otherwise it can get difficult (I've posted a very simple and unfinished blendmap painting tool called TED on the forum some time ago, it may be useful for you).
I don't want to blame the developer but simply never use GED, it was an approach to create a realtime editor that uses the engine without having to rewrite anything, that's why you cannot edit blocks and the like in it. Everytime I used it I've only had problems and crashes.
