All of the waypoints need to be on the custom terrain surface you provide. That is a check that occurs at takeoff. It doesn't let you go off the edge.
The terrain is set to be relative to the surface you provide.
If you are in a pinch you could check it with your data and then compare that with what the SRTM version provides. I think as long as you are not flying super low it won't matter much. The SRTM data is actually pretty good almost everywhere.