Greyscale Image (Heightmap) and Displacement Modifier

Hello. I am trying to accurately create a terrain based on a fictional place. The terrain is part of a story so I have deliberate landmarks and rivers ect. This terrain will be the “stage” for the story I have to tell. I am having trouble with making the terrain via greyscale image+displacement modifier. I tried following tutorials but every time I apply the displacement modifier, nothing happens (yes I applied xyz as input color space). I am left with a flat subdivided plane. I even tried the importing image as plane method but do not understand what happens when this is activated as the size of the imported plane seems not consistent with the image dimensions but the default plane size. I have some questions.

Does it matter what kind of image is loaded (bmp, png,8bit, 24bit, etc.)?
Is it necessary to scale the plane to a minimal size?
Does the size of the image matter (resolution)?

Edit: I realized I did not render to see the results. I did a render and see that the deformation happened. I thought the mesh would deform according to the greyscale image and would be visible in the 3D view. Now I have more questions.

Can the subdivided mesh be deformed into terrain and be visible in 3D view?
How do I get the mesh dimensions to be consistent with the image?

Attach or post a link to an example blend before you apply the modifier (why are you applying it ?)
Ensure you include your texture in the blend file (pack your texture with the File / External Data menu)