Hi,

Turning on Allow Virtuals slightly decreases the quality of the billboards, but your picture shows much more degradation than expected.

To narrow down the source of the problem,  you might want to set the following Billboard settings to see if the quality improves:

You should also try disabling all Post Process Volume in your Unreal scene; certain post-process settings might be contributing to the issue.
You can quickly test such edits using Live Sync: https://aximmetry.com/learn/virtual-production-workflow/obtaining-graphics-and-virtual-assets/creating-content-for-aximmetry-de/interactive-editing-with-live-sync/

Note that when Allow Virtuals is enabled, the Billboard is not occluded by the ground in your picture because the Render CustomDepth Pass is not activated on the floor object. More on this here: https://aximmetry.com/learn/virtual-production-workflow/green-screen-production/aximmetry-de-scene-setup-green-screen/#setting-up-objects-in-front-of-the-billboard

Warmest regards,