If you output the heightmap properly, World Machine is perfectly capable of creating 16 bit files.
Does the heightmap look steppy in Photoshop? Chances are WM is using up only a small portion of the available heights, which are then scaled up in Sandbox. That will surely introduce stretching of height values which causes stepping. Take a look at the Histogram in your file to see if only the darkest values are being used.
Make sure you set your World Parameters in World Machine properly; set the world extents the same as you want your Cryengine 3 map be, and in General Setup set "Terrain altitude scaling" to approximately what you want your highest peak to be. Then, normalize the height values since devices such as Erosion will only reduce the range of values - highest peaks will get lower and eventually you end up with a heightmap that uses only the darkest shades, which will naturally introduce stepping.. Normalizing the heightmap will ensure that the heightmap takes proper use of the entire range of brightness values. Use the Clamp device for this (only tick "Normalize input", don't clamp the upper values since that will just cut the brighter shades!)
Heightmap before and after normalization.
This is most probably not the issue though - even the darker heightmap there looks perfectly smooth when I import it into Sandbox, so there must be something really wrong with either your World Machine setup, or the opening and saving process in Photoshop... Just double-check you're manipulating the files in 16 bit mode.
I have no idea about the tile view issue, but you managed to get matching tiles before so just do what you did earlier I guess.