With spray foam, you can trim it, paint it, carve and shape it, etc. and make it look like you want, including blending it into the background. You can also use it to cover the holes and make the existing background higher. It's entirely up to you. Even if what you do is not a perfect match, eventually algae will grow on it, etc. and it will blend in. Good luck whatever you decide, I'll be following.
Another option is to simply modify the holes and background a little bit (if it's made of foam) and encourage fish to use it as cover, especially if you're doing a sunfish tank.
If you cut and reshape some of it, paint it with regular Drylok mixed with cement colorant (dries and cures quickly) and make it blend into the rest of the background. Same if you use the spray foam.
A nice piece of driftwood might look pretty good in that upper 2".
Modify the holes in what way?
I have no artistic ability, and no confidence in my ability to shape, cut, color, or blend anything.
I do like the idea of a piece of driftwood at the top. Or roots.
To be honest, I am now not sure what the background is made from. I had assumed foam coated in something, but it may not be. I'm not sure how to determine that.