The problem can be reproduced using basic shapes from Engine Content.
- Create a basic level, place a cube in the world.
- Turn on mesh distance field visualization from Show->Visualize->Mesh DistanceFields
- Open the cube's Static Mesh, and set its DistanceFieldReplacementMesh to a Sphere, hit Apply, then the mesh distance field visualized in the viewport changes to a sphere. But if you enable Nanite, the distance field won't respond correctly.