Premature / overlapping LOD transitions with Instanced Foliage
This issue effects every mesh asset I've tested with the foliage tool / procedural foliage placement in 4.9. LODs begin overlapping one another at varying distances and transition too soon compared to their static mesh counterparts.
I could see having two LODs briefly drawn together, but the overlapping is persistent. The attached example demonstrates the issue with the BogMyrtleBush_02 asset from the kite demo:
Please click below for a larger version.
This is a bug and will be fixed for 4.9.1. Version 4.7 and 4.8 automatically enabled the dithered LOD transitions for foliage but as we now support them for regular static meshes in 4.9, that broke the previous foliage behavior. The workaround as you mention is to open the material and check the the dithered LOD transitions checkbox.
There's some more detail as to why LOD transitions work this way for foliage and why it's efficient in the bottom of this thread:
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