The 3D terrain has no effect on combat, either for height or for defense. Another major faux pas that everyone has commented upon is the slow load time to go between the strategic and the tactical maps. The main thing that turns me off about this game is that there is no strategic consideration to winning. It's just a matter of building up enough mass to overwhelm the enemy. The regions have no positional significance, nor do the unit mix matter.
Terrain plays no role in combat.
What's the worst about this game is that, unlike other games where there is a variety of map types and situations, there is only one map, one setup, one opponent, and it's all the same for every play. And once you figure out the appropriate research path to follow, then there's nothing left to play for. It's a very shallow game.