This is actually how to paint Vertex Color on a non-Nanite mesh inside the editor and then by turning on Nanite, we interpolate the Vertex Color per cluster. View distance will change the Vertex Color, so try moving away from your object to see the clusters change size based on screen size. Non-Nanite Vertex Paint can be per-instance, and that's why it is useful. This is per object, so all instances of your object will have this Vertex Color written to them. Epic is investigating a solution to this problem, but they have nothing currently in their Nanite roadmap.

not being able to vertex paint per instance on nanite meshes is basically a dealbreaker for me.. what good is all of that extra detail if it's copy/pasted literally everywhere? you'd need tons of unique meshes with unique textures to create an environment that isn't completely repetitive

Thanks a lot mate!