You're on to something here...
Two concepts:
Curvature of the earth. Radar looks in a straight line, but the curvature of the earth means that the radar can't see over the horizon. For AH to model this on a flat map, the bottom of the radar could be a shallow, inverted cone with the point on the radar. In other words, the radar lower deck would be zero at the radar site and angle up to, say, 200 feet at its extreme horizontal range.
Terrain Masking:
Radar can't see through mountains. Regardless of the aircraft altitude, radar would not show contacts if it had no line of sight. This one might be a coding nightmare, but it would better reflect the real world and open up some interesting NOE situations.
Yes, it's called Line Of Sight. While I personally like the changes, I too believe 65 feet is too low... but likewise I also believed 500 feet was too high. I think 200 feet is fair, but at least raise it up to 100 feet.
I also believe that the radar tower in the town and the radar tower in the base should work independently. Ever notice that if the town is west of the base and you come in from the west, that the town starts flashing first? In a way it's already like that, however I believe that taking down the radar tower in town eliminates the town radar, and taking down the radar tower in the base eliminates the base's radar. Radar would not technically be 'down' (looking at base status) unless both are destroyed.. at least at an airbase.
I also believe that dar bar and radar bleeps should only appear if there is a clear line of site between the top of one of the radar towers and the plane (regardless of distance), and also should appear if you are within icon range of an enemy plane/gv/boat. I don't know how hard this would be to code, but maybe consider it for future versions.