I have downloaded free DEM from the NET and I generated a contour line with 10 meter for interval. So, I just want to convert the contour lines to LAS point file to create a new terrain dataset. Is this a correct way to create terrain dataset or not, if not what is the best way to create terrain dataset with a free data?
You can build a terrain dataset from points or lines as well as ASCII grids. No need to convert to LAS points, all you need is a multipoint feature class (which can be created from any of the above).