The decision to use FSR performance mode and to target 4K may have come late in development - long after the art style and the animations were locked down.
Perhaps it was a due to the performance of alternative modes, perhaps it was some kind of marketing tie in. I dunno. Epic's own UE specific TSR would probably have been a better choice for working with UE5 though.
I think this is just a mismatch of artist understanding for how these effects work, what data they need, etc, and how the engine works. It's not clear that this even has motion vectors, I suspect we'd see similar artifacts in just about any engine. And a small team / smaller budget means less time to experiment, less time to iterate, and less time for knowledge transfer from one part of the team to another.