Skyrim Special Edition supports newer texture compression and NIF formats. They are used by default.
Skyrim Special Edition has a new feature, the so called large references. This system requires the creation of DynDOLOD.esm in addition to the DynDOLOD.esp. It is required to adjust a setting in the DynDOLOD SkyUI MCM Main page in case the large reference system is turned on or off after generating LOD. See the explanations and links below.
Make sure to clean and error check the load order with xEdit before running DynDOLOD. The Batch Plugin Cleaner for Mod Organizer or the xEdit Cleaning Extension for Vortex help to automate some of that. Typically something like the Unofficial Skyrim Special Edition Patch is required to fix unresolved errors in the vanilla game files. Refer to modding guides how to setup the base game properly including SSE Engine fixes etc.
Skyrim Anniversary Edition
On November 11, 2021 Bethesda released an disruptive update for Skyrim Special Edition from runtime version 1.5.97 to 1.6.318 (now 1.6.353). The Skyrim Anniversary Edition refers to Skyrim Special Edition including the Anniversary DLC. The runtime got updated for either version.
This update means that all engine fixes, bug fixes and mods that depend on DLL plugins that were made for the runtime version 1.5.97 stopped working and need to be updated for the the runtime version 1.6.318 (or later). Check the SKSE Plugin Status which mods depending on a specific runtime version have been updated.
DynDOLOD works as always with or without the Anniversary DLC and also fixes a couple bugs, like wrong meshes or texture paths and stuck tree LOD.
Skyrim Special Edition Visual Bugs and Oddities
In true Bethesda tradition, Skyrim Special Edition also has quite a few irritating visual and game breaking bugs (Archive), even though these bugs have been reported a long time ago and the game received several updates since then.
By now some of them have workarounds or community fixes. The situation paints a rather appalling picture of Bethesda, considering they are milking Skyrim Special Edition and paid mods by exploiting free mods and fixes required to make the game remotely usable for modding. Many of these fixes are not possible for the console versions.
In regards to visuals and LOD, the newly introduced large references and the water cubemap reflections of LOD ignoring transparency are the most damming ones. Terrain LOD lowering in the distance - which is baked into a shader - presumably to counter z-fighting is just another oddity to be aware of. It will be hard to unsee once it is being noticed...
The large reference grid is a new feature of Skyrim Special Edition and Skyrim VR to show a select list of full models outside the active exterior cells. What in theory is a nice feature is self-sabotaged by the fact that Bethesda forgot to account for the fact that mods regularly make changes to references in exterior worldspaces. See Large Reference Bugs.
For dynamic LOD to work correctly with the large reference system of Skyrim Special Edition or Skyrim VR, the Large References Fix setting in the DynDOLOD SkyUI MCM Main page needs to be checked or unchecked depending on the large reference distance setting. See DynDOLOD SkyUI MCM for details.
LOD Water Reflections
LOD has always been used for water reflections. In fact in Skyrim, the terrain, tree and object LOD (with a few exceptions or tricks involving setting ShowLocalMap flag and opening the map) are the main objects used for the cubemap.
In case the trees in the reflection have a black outline, make sure to not change the texture format of the texture atlas to DXT1. TexGen and DynDOLOD will automatically fill the transparent parts of the texture with the average color to avoid black parts. However if DXT1 texture compression is used that information is lost and substituted by black. By default the BC7 texture compression format is used for all textures created by TexGen and DynDOLOD for in Skyrim Special Edition and Skyrim VR.