Can you explain the projection issues you faced with the DEM? I thought something like gdal can reproject any data into a standard projection like web Mercator.
If I recall correctly Cities Skylines needs a UTM-like projection but I think I made an error with the input data and got the X/Y scaling wrong. It was a fairly amateurish attempt and my knowledge of coordinate reference systems has improved quite a bit since then so I hope to fix that for the next attempt.
Good news is you can even overlay screenshots of Google Earth (which uses high-res data, some of it at 30 cm2 per pixel). Will take some fiddling with the coords, but it works!