You can't really convert a mdl to a terrain heightmap (unless maybe you made a gray scale overview map of it and imported it to MED or something).
If you assign the terrain model the polygon flag like Superku said (click the polygon checkbox in WED, of by script like said above) the c_ functions will use polygon collision on the model, so it should behave similar to a terrain. You could also do with with any model you want to use for geometry where blocks won't cut it. In some cases it may be better to use invisible blocks for collision or to keep entities out of complex geometry.
Entity running up a model using c_move. Model has polygon set.
Hope that helps.
Another picture showing a model being used like a terrain.
