As far as changing textures according to height, I am not to sure. But for the first question, could you just instantiate a crater model to the location the missile hits? Just cover it with some particles so you do not see it just magically appear, and your off to the races.
=) Imagine a bloom like a sphere< where it’s radius is proportional to a bloom power, then, you can subtruct invisible sphere from (contact point + altitude for smoothing) and there would be something like a crater. But, for more believable crater, you should add some riffle (random) and a crater borders.