Try this:
-Create a totally new level, call it HAPPYFUNPARADE
-Goto file, generate surface textures and click ok
-Create some terrain for testing
-Goto the terrain layer editor: Terrain --> Texture
-Select Default
-Click on the black square and browse for beach_white_sand.dds in textures/terrain
-Click ok
-Click on Edit Surface Types
-Click on material editor
-On the left side of the material editor, click on the little cross where it says "materials"
-Goto the terrain folder
-Pick a new material, beach_dirt for example
-Close the material editor
-Click "pick selected"
-Close the terrain layers editor
-Goto file, generate surface texture
You should end up with this:
