Even if you modify the terrain exaggeration the buildings still float. There's a few different methods for resolving this. One method suggested in the Bluesky blog post is to model terrain and imagery right into the KML file and then load it up in GE. This certainly works. Another method would be to take a look at a different system for visualizing the data.
The latest update to ERDAS TITAN has a good technique for sorting out this problem: it allows you to specify your own terrain layer. Once you add your data as layers in the viewer, you'll see a similar problem as depicted above - again due to the accuracy of the default terrain layer. The only difference is that instead of seeing floating buildings the buildings are embedded under the terrain layer, so that some of the smaller buildings are not visible. Here's a screen capture that displays the issue:
You can see that some of the buildings in the foreground appear very "flat", and there are others that are not even visible.
The solution is to add a terrain layer. In this case I processed my own digitial orthomosaic along with a terrain layer during the photogrammetric processing part of the project. I added the digital elevation models as layer, right-clicked on it and chose the "use as terrain" option.
The layer gets shifted to the terrain folder and the TITAN viewer updates to reflect the new base terrain. The result is that the buildings sit perfectly on top of the terrain. Here is the result, from the same perspective as the screen capture above:
In summary, take a look at TITAN if you're interested in this kind of workflow. The ERDAS TITAN Client is free, so you can download it from the ERDAS site and give it a whirl with your data.