Hi Jake,
Please don't nuke the things that people have worked on, like the town, but rather copy/paste it floating high above where it is currently. Then you can focus on redoing the terraforming. Later, you can re-use the houses that people have built after replanning the town.
Overall, I agree that you should focus on terraforming. I usually don't plot anything until the terra in that location is in a semi-final state (i.e., the sculpting is done, and placing schems/painting placeholders remains). Also, last I flew over Varner I saw a lot of terrain that wasn't completely cleared, with lots of holes, floating blocks, random stuff mixed into the green wool, etc. You should make sure to properly reduce the terrain to a "blank slate" consisting of only smooth green wool; it'll make the terraforming a lot easier.