Yeah, the collision code first does a standard Game Maker collision and then does a Z collision check (using a per-instance collision function to allow for things like slopes) to see if the overlapping objects are colliding vertically as well... so the collision mask of the terrain object's sprite is used for the XY collision check regardless of what you draw. If you make the walls more narrow than the sprite, you should change the collision mask to match this (either by giving the walls a new sprite, or changing the existing sprite's collision mask to not cover the entire sprite).