Still having the issue in Unreal Engine 5.7.4.
In Unreal Engine 5.6, a Ray Tracing Proxy setting was introduced in the Static Mesh Editor. Adjusting the Ray Tracing Fallback (setting the Relative Error to 0) significantly reduced VRAM usage and improved shadow quality in ray tracing. It also fix the mesh appearance in the Path Tracer.
This approach appears to be much more efficient than using r.RayTracing.Nanite.Mode=1 in UE 5.6 and UE 5.7.
