Landscape has a 65536 (i.e 16 bit) vertical resolution. If you divide that by your 1600m range of elevation, that gives 2.44 cm per step. That means that changes of less than an inch are not representable, and your landscape will be noticeably lumpy at the inch scale.
That said, looking at your new image, I think your problem is not vertical resolution, but horizontal. Horizontal resolution limits how steep your slopes can be before you get obvious folds / triangles in the landscape. I think you need to increase your landscape resolution above 4033!