Hi again @morriarty90,
Alright, yeah it’s definitely not your lighting that is the issue, that’s a very dim light and you’re still seeing some issues (you can go ahead and reset that). After trying a bunch of different configurations, I can’t replicate your issue, but I do have a few other suggestions that you can try.
First of all, I would try creating a new test level with a completely new postprocess volume with this material. If you’re still seeing issues in this level, this will confirm that the issue is not due to some setting changes.
Next, I would try changing your lighting method. If you’re using Lumen, it evaluates lighting every frame, which can mess with toon shaders (granted, not usually in the way you’re seeing here). Still, I would try the other Global Illumination methods to see if that might be the cause.
Lastly, if none of these work, I would change how you evaluate your light values. Your current method is causing a lot of graininess and while you do later mask this out, I’m wondering if a glitch here might be the cause.
I would try either removing the Saturate node or replacing the SceneTexture:BaseColor with SceneTexture:DiffuseColor.
Let me know if this helps at all!