Absolutely! This is one of the many ways that people use World Machine.
Assuming you've already downloaded the Basic Edition, an example file showing this use is in :
File->Open Examples->New Examples for WM 2.3->Techniques->Improving Real World Terrain.tmd
It shows the basic process of importing a heightfield, adding additional detail and erosion, colorizing, and exporting again.
Also, in the current Dev Branch built (available for current customers only), the only fiddly step in the world above (the fractal noise addition with the Advanced Perlin device) is much easier (simply select "Fractal" resampling type in the File Input and tune the roughness parameter)