Displacement luxel density

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This is not a bug. Displacements have a maximum luxel density based on the size of the displacement. Each displacement is limited to lightmap resolutions of 124x124. If you make very large displacements, you'll find that you cannot make small luxel sizes on the displacement. One solution is to split any large displacements into multiple smaller ones and then sew them together.

See Displacement for more information on how to create, edit, clip and sew displacements.

Note: A similar (less restrictive) limitation technically exists for brushes as well. Brush surfaces can only have have up to 31x31 luxels per face; VBSP normally subdivides brush faces as needed to fit this restriction unless the material has %CompileNoChop, but it is unable to do this for displacements.

Important: Since lightmap UVs are dependent upon regular diffuse texture UVs, rotating a texture will result in even less lightmap resolution being available! Unlike with luxel scaling, Hammer does not account for this, but VBSP will fail with "Bad surface extents".