I've used expanded polystyrene to make hills and cliffs in the past, I tend to use 2 part car body filler on top in a very similar way to your wall filler, it's cheap for the amount of material and hardens brick hard without shrinkage so no warping.
Eventually (3-10 years of use, they crack and chip, seldom needing more than a dab of paint to make it right) and a few get lost to traumatic clumsiness.

You can make very pretty looking results using the foam alone, but i wouldn't waste all that work, it really doesn't last. A friend of mine once bought a dozen or so 2'x2' terrain tiles about 2" thick. It came in vinyl protective satchels for transport and storage, with hills, gullies, roads, fields and swamps fashioned on the surface. it was machine flocked onto the foam and looked very pretty initially but without the protection of a harder surface they came to look shabby within 6 months and dreadful in a year or two, they weren't cheap either. For anyone wondering about using expanded polystyrene without it's worth noting that the extra loose hill sections that came with this set broke all around the edges and were binned within a month. I tell a lie, 2 of the small flat hills survived with a downgrade to wargaming table coffee coaster.

These days like Bligh I like to take advantage of the new non-expanded denser foam boards, easy to cut, takes paint well and the finished article is pretty robust but most of my old terrain still has ceiling tiles and insulation inside as the basis.

However you make it, if your terrain turns out as well as the pics I've seen of TexaS' or Bligh's, you'd have to be seriously proud to put it on the table.