You have to have some situational awareness - am is the terrain hilly, is the airport in a valley or on a mesa, ect. Being aware of what is around you is the first key. That said, if you are anywhere beyond about 3 miles or so from the threshold, and the RA is under 1000 feet, you should be asking some serious questions - as you are getting very close to terrain for your phase of flight. Certainly there are exceptions, a hill on final, ect.
The bottom line goes back to SA - you have to have it or you're likely to get killed regardless of how the aircraft is equipped (another argument for real experience in the cockpit, but that's another story). The Radar Altimeter isn't the end-all be-all of terrain avoidance, but it is a very valuable tool for a competent pilot.
Legally (and professionally), you aren't using RA to establish your DH or MDA - what you are going to use it for is to enhance your overall situational awareness. If the alert is set at 200', then I'd better be on about a half mile final when it goes off, otherwise it may be time to think about going around.
For non-precision approaches, the 121 carriers I'm familiar with round MDA _up_ (always round up) to the next higher 100 feet. The idea being MDA is indeed a minimum you can't go under, so stop a bit shy of it - if the WX is so low that another 50 or 80 feet makes the difference, it's probably too bad to be doing a non-precision approach anyhow (not worth the increased risk). Here there are two schools of though I am aware of: One (if the alert will go high enough), set it to just above the actual MDA, as a warning that you are about to descend below the MDA. Two (my personal preferance), set it to 200' - it provides a final check to insure you aren't too high or low on short final. Again, you should be on about 1/2 mile final at that point.
Again with both of the above goes the first caveat - you have to be aware of what the terrain is where you are. It is as good or bad as the pilot using it.