The current blue overlays in the terrain editor are tile-based. They should be updated for use in isometric mode. (afaik it's an overlay image)
Yep, special handling of isometric is still needed there. Thanks for opening an issue for it.
@Ablu explained how to work with isometric tiles while this issue remains on the forum.
My workaround unfortunately only seems to work for non staggered isometric maps. Staggered ones do not work.
Right, staggered maps need more complicated neighbour-logic.
The rendering of the terrain overlay and related mouse handling now works based some new properties on the tileset:
The remaining issue of using the terrain tool on staggered isometric maps is covered by #427.