Bro, I’m not sure what’s going on with your situation, but I found that my issue was caused by using multiple materials in the LOD setup, where one of them didn’t have Dithered LOD Transition enabled. Even though I wasn’t using that material, it still caused the Dithered LOD Transition to fail.
However, this problem only occurs with foliage instance—it doesn’t happen when using Static Mesh directly.
This is my post: Dithered LOD Transition Issue when using multiple materials
Hope you solve your issue soon!