Mmm... getting warmer... the units were fully 3D, the terrain was "quasi-3D". It's a flat texture put in place to represent a real heightmap... and the heightmap is real 3D, ie, units rock as they go over bumps, shots get blocked, etc.
We're both right.
Height maps are basically just an extension of collision zones/masks. It's just a cheat to give the appearance of 3D.
However, they incorporated the height map into their physics equation so that for all intents and purposes, it played as if it was 3D.
So, from an animation/rendering/engineering standpoint (where I am coming from), the terrain is not 3D.
From a game perspective, you can achieve most "3d terrain benefits" by simply using a height map. Thus, in that case, it could be considered as 3D.