Actually, diagonal slopes already exist with half heights. If you have flat ground and heighten one point twice, and the two points below (south and east) once, the tile which border those three points IS a diagonal slope. Works in other directions the same way.

But it's hard to utilize them, since you need to build them carefully by hand. This is because of how the heighten tool works. Like this:

If you click on a point on flat ground, it raises one layer, everything else stays the same. So far so good.

Click again. Now it raises another layer, while all the others still stay the same (using half heights, of course)

Click again. It raises another layer, and all eight surrounding points raise one layer.

With this, you will always get square mountains. which do not utilize the existing diagonal slope.

I think the behaviour could be changed like this:

First click raises only that one point.

Second click raises that point and the four straight adjacent points (north east south west). We already got four tiles with diagonal slopes.

If you continue clicking like that, you again get a square hill, but this time the square is rotated by 45 degree. So that's not really special.

However, if you raised a square of four, nine or more points, the hill gets an octagonal shape and should look smother.

Basically, whenever a point is raised so it's two layers higher than an adjacent point, raise that point too. Or rather, before a point is raised a layer, all 4 adjacent points must be at the same level or one level higher. If they are not, they are raised first. If they can't, it needs to be checked wether the four diagonal adjacent points are already 2 layers lower and try to raise them if they are, otherwise just raise the point. Thus, you'll get only hills with soft slopes, except for wherever an obstacle is, which allow for octagonal shapes.

I think with the right kind of lightmap, it should look a lot better than hills right now. For gameplay, if ways can only go on soft slopes it would be better if those are the ones that get generated by default anyway.

If it was somehow possible to add diagonal steep slopes, it would not even be nessecary to check diagonal adjecent points.