Thank you for the tutorial! I use a similar approach to make realistic terrain (mostly downloading SRTM data and then merging it in QGIS to use it in Photoshop), but I don't understand why do you need to use GDAL to convert the TIF to a readable file?

What I do is to simply right-click the merged layer, Export -> Save As -> and then change the Output mode from "raw data" to "Rendered image". This exports the full heightmap and it's perfectly readable by Photoshop. Maybe your method takes into account things that I haven't, so let me know if I've missed something