So because this topic has so many reads, I am assuming some people had the same problem with updating the altitude for shape files. Everything is there in the file including a DEM. The shapefile is imported and when you hit UPDATE ALTITUDE, it does nothing.
The resolution for me was to go to DEM or ORTHO, select the shape file, right click and select MEASURE. It will show you if all the points in the shape file have an altitude. In my case, one point did not have a DEM altitude. This caused Metashape to not UPDATE ALTITUDE because one point out of 45 was not on the DEM.
Resolution was to either move the point on to the DEM or adjust the region in the workflow to make sure that area is processed so the KML overlay was completely on the DEM.
Anyways, after a month of several maps doing this, I can now go back and fix them all.
Good luck out there, be safe!