Enabling Nanite deform and breaks modular mesh

You’ll want to adjust the position precision. Also, an important note from the documentation:

Quantization is a form of lossy compression, and lossy compression is particularly challenging when working with modular mesh pieces, or other meshes that have shared boundaries. Especially if those boundaries need to align perfectly to not introduce holes, or cracks, in the geometry. To ensure consistency, the quantization happens in unnormalized object coordinates centered around the mesh origin. This ensures that the quantization never causes cracks when the mesh uses the same precision setting, and the translation between the mesh centers is a multiple of that precision.