This is related to the optimization applied in CL#13181876.
Binding simulation mesh to display mesh can't find the nearest triangle when a triangle is located near the AABB boundary.
1. open attached project [Link Removed] on 4.26
2. open ClothTestPlane asset in content browser
Unsmooth mesh with cloth simulation is displayed.
removed the optimization in CL#13181876.
There's no existing public thread on this issue, so head over to AnswerHub just mention UE-111788 in the post.