I must admit that I haven't studied the inner workings of radalts closely, but I think the idea that they read the 'nearest' terrain to you is erroneous - Puntosaurus, if I read that quote of yours correctly it's suggesting that if you're hovering 20 ft away from a cliff and 150 ft above the ground directly below you, it will read 20 ft?!
If that's the case, then they should read your correct height AGL with any angle of bank on, as it implies that the beam is omnidirectional. I have always believed that the beam is quite directional, ie out of the transmitting antenna (under the forward part of the tail boom, say) and bouncing back up to the receiving antenna to be processed, and that's why they break lock when you put a decent amount of bank on.