I created a custom dimension via a data pack with a total height of 2032 blocks.
I can teleport into it and move around just fine.

Nothing renders except entities, and they are immobile on the client. The server is not frozen or lagging at all.

Attached a screenshot and a client log file. The log is shortened to only when joining the server in that dimension.

This affects all dimensions with a total height of 528 or more blocks.