It wasn't a hoax, they just vastly oversold the premise and usability of their own technology in real world applications, Unreal Engine 5 does exactly what what they set out to do in the context of a real-time gaming engine.
The problem is primarily in terms of how big these assets are on disk, we are talking about a ton of data that needs to be streamed in, and I'm curious how Unreal Engine 5 addresses this issue. The I/O in Playstation 5 is what finally makes this possible and I imagine Unreal Engine 5 stores several point cloud versions of a mesh on disk to have the best possible version to calculate the final triangles from with the least I/O overhead possible.
I expect that Unreal Engine 5 applications that uses this technology with be significantly larger than games we have today simply due to the amount of data it needs to calculate triangles from a runtime and any shipping products will need to simplify these point clouds to a certain degree to ensure viable file sizes on these relatively small 1tb drives the next gen systems have.
We don't know a lot about how Epic achieves the results they do, but the immediate downside of it seems to be a massive increase in stored geometry on disk.