It's in CD2\MSGAME3.cab but if you have the FS9.1 update installed don't replace the file from the CD. It is one of the files updated by the FS9.1 update.
terrain.dll errors do not necessarily mean the .dll is bad. It usually results from bad terrain bgl's or .bmp's.
At that time [1909] the chief engineer was almost always the chief test pilot as well. That had the fortunate result of eliminating poor engineering early in aviation.