The block is just there so when you build the level it shows that there is geometry in your level so it can build. WED levels don't compile without at least one geometry block. Now you can place your Actor models on top of your entity terrain and they will act upon the terrain and not upon the block (block doesn't even have to be seen, you can hide it).

The terrain isn't actually theoretically an actor as well unless you put the action of it on it. Terrains general don't have actions unless it's for shaders of some sort or the other. In your levels case it should just react like it's a block and that you can walk on it. I mean you can try all this out for yourself real easily in WED.