Seed and coordinates are in the screenshot. Terrestria 2.0.2 is installed, and so is Traverse.

From an initial look, it seems like the cave generator isn't properly removing the sand?

I agree with that assessment. Having some hanging sand over a cave is a pretty standard part of the Minecraft experience, but it typically comes as a solid shelf that serves to hide the danger from the unwary. The sand here is fooling noone, and looks pretty odd.

Here's another screenshot, a while later. It seems like, besides the floating sand issue, when the edges of hills are too steep, stone can get exposed instead of turning to sandstone.

I think this is mostly just because our sand layers are a bit thinner, not 100% sure though.

This is caused by https://bugs.mojang.com/browse/MC-16132

After thinking about it, it would probably be good to make the sandstone layers thicker just to hide the caves to begin with.