I gaving patching this one a try in Rhino and it doesn't really do a very good job of this case neither, it is hard to handle that kind of steep gorge running through the middle with a fitting process. Maybe with a really gigantic number of points...

I think you may have something like a cliff or steep valley in this terrain plot? Probably that is going to need to be constructed in sections I guess to preserve a sharp drop, a fitting mechanism that wants to make a completely smooth thing won't handle an intentional sharp cliff very well.

Probably something specialized for civil engineering and TIN terrain models would be best.

Another kind of approach might be to take those outlines into a bitmap program nd make different shades of gray for the levels and do some blending and softening between them. Then you can take that into ZSurf to make a heightfield:
http://moi3d.com/forum/index.php?webtag=MOI&msg=602.7

- Michael