Hey man! thank you for sharing
I've done similar things with WPO and Distance Fields and keep running into lighting issues. I expect the object's boundaries to behave strangely when doing WPO operations in combination with distance fields. Moving verts without DF will update the "limits" correctly, while with DF it will look strange.
Take a look at the outline in this comparison picture:
DF_WPO_Issue1907 × 1007 700 KB
Any ideas how to solve this or why this is happening?
The only workaround I know of is to use the Shadow Pass Switch node. However, this results in minor shading artifacts on the shifted surface:
DF_WPO_Issue_ShadowPass2814 × 672 205 KB