New terrain blending doing weird things

New terrain blending appears to cut villages and flatten buildings in to big platforms.
I was testing upgrading old worlds to 1.18 in pre release 4 and i was cheking out the terrain and found some weird stuff. Images in the attachments. The world from version 1.16.4 jumping straight to 1.18.

Steps to Reproduce:
1. Take an old world.
2. Look around the terrain blended areas.
3. Find a village.