This could just be something else, did you try without actually Setting the material on the prop ?
I just pinged the team.
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I am also suspecting that the cleanup for the verse-allocated memory is still not working properly(at least for SceneGraph entities).
Looking at the UObject trace I got on my (private) Island (SceneGraph Memory Leak causes Fortnite to crash)
shows a large count of UObjects that I would expect to be stale.
If the team thinks it is fixed, maybe there is something about the GC we are not understanding correctly yet.
Does it perhaps only run a “full” clear every X minutes/hours?
Just trying to help identify the cause.
I would love for UEFN & Verse to be a tool for creating larger dynamic game experiences, but sadly, it seems impossible as of now.