Atm, only objects which have a distance field representation (aka shadow casting static meshes) can receive the Distance Field AO. That’s not a limitation of the technique though, just something that hasn’t been implemented yet.
Skeletal meshes casting area shadows / AO will have to be handled by a different feature.
Yep. That’s the price paid by supporting fully dynamic scenes. This is why we try to provide multiple lighting paths in UE4, so games can pick whichever are the best tradeoff for them.
Most other methods have better runtime cost but very poor quality. Distance Field AO operates on surfaces instead of volumes like LPV (another method to compute sky occlusion) so it can achieve much higher quality, it’s not limited to some volume texture resolution.