That error means that the line you are trying to process has at least 1 vertex outside the limits of your terrain data. If it looks like your centerline is within the terrain data limits check spatial references to see if they are the same. (right click on your files in the Table of Contents->properties->Source tab) If I remember correctly, even though ArcGIS reprojects data on the fly to allow everything to show up correctly I dont believe GeoRAS does the same when its processing.
Failing that, I've never worked with GeoRAS using a DEM(grid) before, I have always used TINS. You could try converting your grid to a TIN but keep in mind there will probably be errors introduced in the process. I'm not at my work machine so I cant tell you exactly where the convert raster to TIN is....Its in either Spatial Analyst or 3dAnalyst. Only time I've ever had the "node outside terrain" error with a TIN is when I actually had portions of my centerline outside the TIN.
If that doesnt work, I'm not entirely sure if GeoRAS will cooperate with a server based terrain file. I know we have had issues in 9.3.1 with a couple server shapefiles not processing correctly, but I dont know if that is a server issue or an Arc limitation You could create a clipping polygon and under Spatial Analyst is "Extract by Mask" which will allow you to clip your grid with whatever polygon shapefile you want. This will create a copy of the grid where ever you want to save it.
Good luck. (also, post if you are using arc 10 or an older version as the version of GeoRAS are different)