Right, is the UV layout not what you set it?
The weirdness of the displacement map is because after it subdivides the mesh it has to push out the parts where it added more geometry.
I think though it looks like it would only work on a mesh without smoothing, so you might need to adjust the baking settings so that the low-resolution mesh has smoothing applied and accounted for when you generate the displacement map.
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The UV’s are correct. I thought I would get a smoothed gray-scale image. It seems that it’s showing my edges of my low-res model.
So I need to increase the geometry of my low res mesh in order to get smooth displacement from the high res one?