I live at the bottom of a hill and occasionally fly from home up the hill behind a small woodland (I know I shiouldnt realy fly out of sight but I know it cant do any harm there). In that situation, behind the wood,  I reach the maximum height limit even though the drone is actually only about 15-20 feet up. what then happens if it goes into RTH mode. Will it recalibrate the height and rise to the set RTH height, or fly straight from where it is? as in the case of the later, obsacle avoidance would be an issue.

Hi, if you have to adjust the height of rth it will climb to its altiture and will return in a straight line above you and will pose ... I have settled 165ft ...

.Hi, if you have to adjust the height of rth it will climb to its altitude and will return in a straight line above you and will pose ... I have settled 165ft

Not a good idea. You drone will go to RTH height set from home point. Better you set it to max height so you cannot fly to a lower point and crash.

You can also when in RTH mode go left stick down to bring your drone down in height when you know you have enough clearance to avoid any obstacles.  

In this flight I flew away from the mountain before descending. No way I would do RTH from close to the mountain lol.

If the aircraft is above your RTH set height then it will return at that height. If the aircraft is below the set RTH height then it will climb to that set height and fly home at that. Note that the RTH height is relative to your home point. In your case the aircraft might only be 15-20 feet above ground level but it must be about 1640 feet above home point if it's at maximum.

When/if your Phantom initiates RTH (if it is at or below RTH height above home) it will climb to reach RTH height (above home).

Assuming that RTH is set to a legal 400 ft and you are flying at 1600 ft when it looses signal, it will return to home all the way at 1600 ft.  

If you have dropped down behind your wood then it will head for the trees, not good so you need to set RTH to the height of the trees relative to home + a little extra.

The other problem is that RTH obstacle avoidance will not climb over the trees if that requires going higher than the maximum height you have set (500m?) and the aircraft will then get stuck and eventually land when the battery runs out - set the maximum height high enough to be able to return over any obstacle, or don't go behind anything higher than maximum height.

Obviously when/if it gets back into radio range you are going to have to take control back and fly back keeping it within the 400ft above ground limit, not let RTH fly back at 1600ft above the ground.  (you don't need to exit RTH for that.)

Make sure you keep it sufficiently in sight for you to be able to avoid any unexpected helicopters.