When using the original BP, it has a plane surface which is scaled to the viewer position and moved along with it to produce the effect of an infinite ocean. For this to be as realistic as possible with good performance and look, it is necessary a good amount of vertices near viewer position and less at horizon/infinite view. That said, you will be better with more vertices near points of interest at your scene and less vertices far away. Anyway, I never saw those artifacts before. I recommend you take a look on how the vertices are spread on the plane used in the project so you can understand which gives the best visualization, you can always scale it for your needs and works fine even being a circle shaped one.
The landscape modulation does not use the landscape reference per say, but uses a texture which represents the height information for the terrain, so the project with the island map has one, you just need to remove the texture and disable the landscape modulation at BP_Ocean.