As an update to this issue we have realized it is not the Nanite mesh causing issues but there seems to be a very old bug in the FBX import pipeline where UE messes up the material ID order in the static mesh sections.
A bunch of old threads describing the issue:
This issue is CRIPPLING the high-res mesh import functionality for use as an easy way to enable/disable Nanite on objects with more than 2 materials.