I know you said your terrain model is set to active, but I would double-check that. Make sure all your levels are on, and then take a look at the settings in your Element Template. The symbology for the existing surface is taken from the Element Template selected for that Terrain within the Terrain’s General section and then Template.
Within Element and then Element Template, the symbology that appears in the General Settings is the existing terrain's symbology that will appear in your cross section set when using the Create Cross Section command.