Yeah, it's a thin balance, and to me as someone without years of experience in graphics programming, GPU feels like such a blackbox — hard to predict what will be the actual bottleneck until you implement an approach fully, with real-world loads, and even then it's hard to assess, especially with such variety of GPU performance characteristics on different devices.

So what's simpler / easier to implement in a given system will play an important role, and so are any additional things you want to do with the height data like collision detection, querying, data analysis etc. Anyway, that's a super-exciting topic to learn more about! Thanks a lot for all the thoughtful comments.