Displacement works best on native/internal objects that are marked as "Displaceable" (you will see them in a separate part of the Objects menu). Currently this does *not* include any imported objects, including OBJ, TGO, or LWO.
Displacement is possible on imported objects, but it is tricky to work with and requires some specific approaches to get it to work well. You need to switch that object's rendering method (on the Rendering tab of the object settings) to Force Displacement. The displacement will render, but will *not* show up in the 3D preview or RTP, unfortunately. And you need to remember that displacement amplitude values are typically in meters (unless it's a multiple of an input, which should be clearly labeled). You will want to be very cautious about using strong displacement. Start with very small values and increase from there, using crop renders to test quickly.
We definitely intend to improve on these limitations in the future, but for now that's how displacement on imported objects works.
- Oshyan