Answer: Cedar roots often work their way out of the soil as they age. Adding soil or compost and seeding the area may cause some problems for the roots by reducing oxygen and holding too much moisture against them (which could lead to root rot). You'd also have the problem of trying to grow grass in dense shade. Compounding these problems is that tree roots will compete with turfgrass roots for moisture and nutrients. The tree roots will win the battle and the grass will eventually die.
With that said, you might want to consider landscaping around the roots and turning the area immediately beneath the tree into a woodland understory. You can plant native sword ferns, maidenhair ferns, Oregon grape (Mahonia) and huckleberry plants between the emerging roots, knowing the plants will eventually grow large enough to hide the roots. Add some shade loving annuals and perennials such as hardy fuchsia, primrose, impatiens or pansies for spots of color. Some groundcovers to consider include Vinca minor (periwinkle), Sarcoccoca, or Lamium (dead nettle). You can poke these plants into small crevices between the roots, or into small holes between the roots.
While landscaping beneath your tree will discourage its use as a play area for children, the colors and textures the plants I've recommended will provide a lovely focal point for your backyard and will help keep your cedar happy.
Best wishes with your landscape!
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