Well, this is a rough tutorial, and I'll refine it when I have the time, here you go, how to: build a tunnel in a hill!
Assuming you have the correct content (I.E. terrain floor tiles, anything else)
1.Build a 1st floor dummy level (4 clicks high) on top of the 1st level, make another dummy level, but have a section jutting out, that will be the entranceway to the tunnel.
2.Go down to the ground level, now, where the center of your mountain is is going to be 12 clicks tall (not including the 2nd dummy level, which will then make it 16). So go to the middle of the ground and click down 12 times.
3.Now, go to the surrounding squares directly touching the recently touched floor tiles and go down 8 clicks, then move one more row away, 4 clicks down.
4.Okay, you've got your foundation layed (sp? :P) out, now, with the up clicky tool, go around (not in a pattern) and click to your heart's desire, once happy with the up clicking result, locate the 12 click down squares, and flatten them once more, down click those squares and go up one floor.
5.On the 1st floor, flatten it all out EXCEPT for the 12-clicked down space, once done, go one more floor up, it should have a dip where the 12 clicked squares are located below. Flatten the 2nd floor out.
6.Go to the ground level, flatten that out, return to your top dummy level, it should be 12+ clicks higher, right? If not, redo it all :P.
7.On the space jutting out on the 2nd floor, it should be draped over the 1st dummy level and should still be 4 clicks high (even if slanted) flatten that out, and remove the wall on the edge of the 'mountain' on both the 1st dummy level and the second, you know have your entrance to your tunnel, and the tunnel itself.
And we're done, before leveling out the floors, put some trees and shrubs on the floor, with the cheat moveobjects on
Here's the finished result ;o
The tunnel is barely visible, but still useable, and the 'hill' actually looks somewhat real!
I hope this helps. ;p