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I think the trench digging is by design as in a real situation railways cannot go above a very shallow gradient unless they are with assisted traction (cables / tooth hauled). The issue you are having with cutting deep and then going elevated could be because you are trying to build large sections at once, the game tries to level out the track between your start and finish point the best it can, so it will go deep into a hill and then elevate above a drop. It would be a good idea to have an option for it snap to the terrain rather than build level, but I think the max gradient for tracks is quite realistic and so it should only snap as far as it can before becoming too steep (hope that makes sense).
Try building smaller sections and you should find it sticks to the terrain much better