Okay first, apparently putting displacement map in normal map blue channel and setting heightmap channel to 0,0,1,0 doesn’t give good results (lots of noise close up). Looked butter smooth with a separate heightmap texture sampler though, but having a separate heightmap texture sampler per material is quite a waste of memory and nerve.
Second, the stretching issue seems to happen when the mesh is scaled non-uniformly, in this case, road material is 4096x2048, road mesh was also scaled from 1x1x1 to 2x1x1 which caused the UV to be stretched along the X and the height going in all the wrong directions when viewed from the sides. This issue makes it quite difficult to get perfect results with landscape splines even if the mesh is modeled 2x1x1 and UVed properly, because landscape spline by itself makes the spline mesh shorter, longer, depending on the distance pf control points from each other.
Third, I find the results quite unacceptable with 32 and 8 steps, and going much higher than that isn’t a very good move in UE4 so I give up using it. I’m going to setup distance based tessellation for roads. A little deformation helps them blend better to the ground anyway.
Thanks all for the tips. 