Why did Alessio Carraro level that huge north mound?

Short answer:  He needed the granite.

In building his hotel in the shape of a castle and preparing for his resort housing development, Carraro needed lots of granite:  for the crushed granite that he used to pave the roads and walkways throughout the property, to make the blocks used in construction of the castle itself and some of the features on the grounds, and to get the stones used to build those long north and south walls.  So all that granite used on the site had to come from somewhere.  In addition, the Gart report refers to an interview with Leo Carraro where Leo says that his father had tried to set up a side business selling crushed granite, for which Alessio would have needed even more granite.  However, again according to the interview, that business didn't get very far--maybe because with the Depression, construction wasn't the boom industry that it had been when the Carraros first came to the valley.