Instead of writing long explanation, I simply have .blend file explaining it all: http://www.pasteall.org/blend/19339
Basically I need to break down terrain surface into triangles, then I join them together, extrude, recalc normals, and bread it back into individual prisms.
While joining/extruding can be done manually, breaking mesh apart is impossibly long process (what you see in the .blend was done manually for demonstration purposes and that was annoyingly long process).
How to automate breakdown into elements? Thanks.