HammUEr, a Hammer/Worldcraft map importer for Unreal Engine

Can you put the map (or just a part where the choppiness is really noticeable) up somewhere?

Decals work quite differently from overlays.
HammUEr uses the point supplied by the map, then tries to find the nearest mesh within a certain range as its projection point.
If for some reason it’s too far away, you’re going to have to move the decal yourself (or adjust the size value so it overlaps with the displacement).

The alpha gets converted to whatever colour you picked in the configuer tab, so you should be able to check it in the mesh viewer in vector color mode.