Hi Ben,

You are not missing anything. It seems something is wrong with the Directional Light GW's shadow effect on transparent materials like the billboard.
We are investigating the issue. Until that you could use the Directional Light module instead of the Directional Light GW module.

Or you can disable the Billboard's Depth Write, however, this can lead to other problems.
To disable Billboard's Depth Write you will have to open and enter the camera compound with Edit Compound In-Place:

Then you will have to enter in a similar way to multiple compounds (INPUT %N=1,  Line %N, and BILLBOARD %N) until you reach the following module and turn off its Depth Write pin:

Warmest regards,

Hi Eifert,

Thanks for looking at it and thanks for the suggestions. In the meanwhile I managed to achieve the look we are going for with baked specular map (and also modified the shader so that the spec map uses the same UV as the lightmap), because the Directional Light shadow quality was not good enough. I didn't try disabling the depth write option, because it'll introduce other issues for us:)

Please keep me informed on the investigation.

Thanks!