Actually, the only issue with the scaling is that anything below 99 z levels uses a different range.
If you want to use Photoshop to correct it, first select everything that's 0 on the red channel, and use that as a mask for a color layer filled with 25,25,25, and set it to subtract. Then flatten the image, and copy the blue channel to the other two. Now you have a heightmap that represents the upper 255 levels, discarding the lower 25, which are on the bottom of the ocean anyway.
If you want 1:1 scaling with the game, set the height to 255 units tall, by 48 units per pixel wide.
courtesy Japa:
Actually, the only issue with the scaling is that anything below 99 z levels uses a different range. If you want to use Photoshop to correct it, first select everything that's 0 on the red channel, and use that as a mask for a color layer filled with 25,25,25, and set it to subtract. Then flatten the image, and copy the blue channel to the other two. Now you have a heightmap that represents the upper 255 levels, discarding the lower 25, which are on the bottom of the ocean anyway. If you want 1:1 scaling with the game, set the height to 255 units tall, by 48 units per pixel wide.