AO in most engines is interpolated based on direct lighting. In UE4 AO does not affect materials in direct lighting, Im not familiar enough with other engines but this is a pretty standard approach. That being said ambient occlusion in general is a fake phenomena we apply to allow materials to have small frequency specific…
Hi, since you linked me. :) I also think it's totally valid to add some shadowing info into the Albedo for things with a volume that cant be captured with a 2D material. I'd agree on it being something you'd want to test well in different lighting conditions and on avoiding reducing the Albedo to 0 in direct light. IMO…