After much testing it appears as though something is not right for alpha brushes that use 8 bit textures when sculpting on the landscape.
Here is a picture showing the different versions and also Substance Designer where the texture is represented as 16 bit:
I am surprised that the engine does not support 16 bit alpha textures by now as the stepping you get from 8 bit textures is just a waste of color data that the 16 bit would provide.
It doesn’t matter how much work you put into a beautiful 16 bit texture in another application because you are forced to reduce it to 8 bit to get the alpha sculpt tool to accept it 
If you export the height map from the landscape and paint the 16 bit version of the alpha texture in Photoshop and then reimport it into Unreal it looks perfect!
…but you can’t sculpt a landscape easily like that of course
Please, Epic, upgrade the engine to allow 16 bit alpha textures to be used to sculpt on the landscape.
Any thoughts would be welcome.
Thanks.