Displacement Luxel Density
From Valve Developer Community
This is not a bug. Displacements have a maximum luxel density based on the size of the displacement. Each displacement is limited to 124 x 124 lightmaps.
Confirm:Is this true for games other than Team Fortress 2 ?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.