If you parent the camera to the controller, it is parented at the bottom of the controller. So, no matter how tall your controller is, the camera will always be in the grass. Use the PositionEntity(camera); command to move it up on the Y axis. Your code should look something like this:
//Create the character controller
controller = CreateController();
PositionEntity(controller,Vec3(x,y,z));
// Get framework main camera
camera = GetLayerCamera( GetFrameworkLayer(0) );
EntityParent(camera,controller);
//Position Camera off the ground and behind the controller (for 3rd person)
PositionEntity(camera,Vec3(x,y,z));
Result is this: http://www.leadwerks.com/werkspace/page/videos/_/leadwerks-engine/my-first-demo-r105
Also, use the DebugPhysics(1); to show an outline of your player controller.