I am making a surface from a mesh with drape, however, the surface comes out with significant “craters” or places in the surface where the topography sags down.
to my eye, and from the images you shared, it looks like drape is doing what you are asking it to do…what different result are you hoping for? Can you clarify a bit?
what is the intent of the final output (printing, rendering, cnc machine etc? )
Drape will not do that. If you reduce the sampling by going to manual spacing and specifying the number of U/V points, you can get a smoother drape that will not fall into the holes, but it will miss the mesh by much further in spots.
Possibly you could QuadRemesh the terrain mesh and then ToNurbs.