I've recently worked with a couple of extremely steep sites and attempted for about 3 days to battle the same weird 3d behaviour: sudden jumps in contours, giant cliffs, holes, sudden peaks, unexpected contour changes in response to adjustments elsewhere and persistent errors while applying numerous modifiers at once...
I stopped and researched the issues... and I found a Design Summit talk by an engineer (DTM team leader?) explaining DTM workings in a technical, but understandable language. Not a riveting presentation, but an enlightening one. This led me to develop a workflow that actually produced the results for me (mostly...), at least for the visual aspects.
Instead of modifying the contours in DTM, I modified them in 2D (converted from 3D source data), deleting the unneeded ones, making new ones, etc... ensuring that they were not exactly one over another. Bringing this back into 3d and then into DTM mostly worked. A rather tedious process, but still better than 3 fruitless days of frustration...
Placing 3d loci at known locations (buildings grade points, other geodetic elevations) and using them as source data works great for smaller projects, but the modification issues remain - one can't simply cut a hole for a building.
I really wish DTM worked better. It would be far more useful if it allowed 3D points to be placed directly one over another, if one could directly query any point to get full xyz coordinates (this goes for every object we create, OI palette could give project and layer z in addition to xy and area without any extra clicks) and, most importantly, if it could interact with other objects. Instead of attempting to create a pad (useful for the land configuration, but a multi-step process) one could simply place the foundations of the building at the right geodetic elevation if it could simply cut the terrain model to accommodate it. At the moment numerous conversions and exports are needed to be able to at least subtract solids, but then there is no easy way back to DTM...
I realize this transition won't be trivial given the current primacy of 2d data, but I'm just dreaming of a real, full 3D... (or maybe I'm in my covid brain fog...)