Reck,
I went the "sculpted foam" route for the little tunnel/hill on my HO layout ... for no specific reason, other than I had to try some method. I guess, also, because I have in inclined/curved tunnel within the foam, I needed to control height clearances, and the foam sheet "sandwich layup" gave me that ability.
I glued each layer of foam together with: (a) hot glue, for quick bond, and (b) a caulk-like adhesive specially made for insulation foam sheets.
After rough cut and glued layers, I "went at it" with a keyhole saw (like those for cutting outlet holes in drywall), an 80-grit belt sander, and an 80-grit drum sander spinning in a drill chuck. All a bit messy ... pink stuff flying everywhere! I was going for a rough, ragged, natural look, so the process worked sort of OK. The contours of the hill look fine, I think, but the bottom, near-vertical edges don't really have a smooth transition into the abutting/surrounding terrain. Not very lifelike there.
The foam painted quite nicely with latex or acrylic paint. I "dry-dabbed" on 4 or 5 different earth-tone colors, with each showing through for a rocky look.
If doing this again, I might try the "crumpled newspaper covered with plaster cloth" method, if only to try something new. I've seen a few guys here on the forum (Anton, I think?) make their hills from crumpled aluminum foil. The facets of the foil really gave a nice, realistic "chiseled" look to the rock face.
Pros and cons to any method, I suspect ...
TJ