On the current map I am working on some displacements sticking through a wall due to how big they are, would it be better to extend the floor/wall to cover them up or make a no-draw room to hide them in?
Doesn't really matter at the end of the day. I have displacements that aren't perfectly aligned and they work fine. If it causes lighting issues, then you could adjust as needed. Open one of the valve maps and toggle to see how they blocked it out and then sculpted it.
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