I'm sorry for reviving an old topic; but the described behavior is more like a snake than a morphed spider or armadillo.  Snakes don't bite unless you are in their territory, most snake bites result from stepping on or near a hidden snake.  Snakes burro into the ground (not always, sometimes they live under rocks).  But in a game like this animating a snake to move on the terrain may be hard, I do not know much about animation, though, this is not mentioning coding the snake to cope with the curvature also.

It seems the main idea behind this is to create an AI which you can't sit on a hill and make quick work of the AI's.  In sandbox-type games creating a ground moving AI that won't get stuck without allowing it to go through walls - I've never seen an AI that can cope with the odd shapes that show up in sandbox games.  I would suggest a bird, perhaps a bat to go along with the cave idea.  Bats live in caves but if you engage in combat they will follow you out to the surface.  I have also seen in a 2d side-scrolling sand-box game a "Giant worm", a worm that can go through walls, although its movement is more of a "flying" movement than digging/crawling movement like you would expect from a worm.  So it can go above the surface, but in the game this worm comes from, it does a sharp U turn as soon as it reaches the surface and goes back into the wall.

P.S. Incase you want to know the referenced game is Terraria.

EDIT: Rearranged second paragraph to be more clear.