Steps to reproduce

1. Load a world with simulation distance set to 4.
2. Place a dispenser at Y = 150.
3. Fill the dispenser with creeper spawn eggs.
4. Stand at Y = 100.
5. Use a command to place a redstone block next to the dispenser, to activate it.

Expected result

The dispenser spawns a creeper, and the creeper falls down to you.

Actual result

The dispenser spawns a creeper, and the creeper instantly despawns.

Original summary
Dispenser doesn’t dispense mob if player is 49.5 or more blocks below dispenser.
Original description
I have a basic tower with sticky pistons and red stone blocks to activate a dispenser at the top of the world.

When I put a spawn egg in the dispenser, it only spawns if I am within 49.5 blocks below the dispenser.

The dispenser is at y255.
When I activate it standing right next to it, it drops a mob and the mob falls to its death.
When I activate it from y206 or below, there is a little blip on the screen but no mob falls.

When I activate it while standing on the top slab of y206, the mob drops.

When I activate it while standing on the bottom slab on y206 I get nothing.

I placed water for the mobs to land in to test in case there was some weird glitch happening.

Same result. Mob lands in the water unless I am standing below y206.5.

I even double checked that it wasn’t a display glitch (because 1.16.101 mobs are buggy af) by doing the kill command and seeing what mobs are listed.

This confirmed that when I am standing 49.5 blocks or more directly below the dispenser, no mob drops. I also confirmed that the dispenser does in fact release and suck up a water bucket from as low as y124, so this distance issue is unique to mob eggs.

I discovered this on 1.16.101 and it remains the same for 1.16.200.