I did try it out and can confirm the issue, the resulting normal “fades out” when I get closer to the surface.
I narrowed it down to being a precision issue when using the SubGraph : It fixes only when you enforce the SubGraph precision in SubGraph inspector when editing (not on the node instances), set to “Single” precision.
To confirm, the Normal From Height node will also fail if force set to Half precision.
It’s a bit surprising and need to check if it’s not some more wider issue with precision inheritance before filing a bug report.