You don’t need to blend down the displacement using the distance mask, you can displace the un-tessellated geometry and that will fix the ‘hump’ you are seeing. You might consider bias-scaling the displacement (orjust subtract 0.5 from the heightmap) to make it centered at 0.5 and displace both up and down rather than just up. With it displacing only upwards like your image, you will have some bad character clipping problems.
In terms of why it looks like a hump, it seems your resolution on the landscape is not high enough to tessellate for the small details in that displacement map. What is the world size of your landscape quads-untessellated? You need to start with a size of 1 meter per polygon before tessellation (or smaller) to have a chance at capturing small details.
In the image I posted above I had modified the engine locally to enable higher tessellation factors. I believe the current engine clamps to either 8 or 16 tessellations per polygon. I had locally set it to 32. Do you know how to build with VS? If so I can tell you how to modify it (I’d do it right now but didn’t bring the build home with me this weekend).