I’m not sure what I’m doing wrong. I’ve tried baking with and without a cage. I’ve tried raising and lowering the ray distance. I’ve switched into blender’s internal renderer and I’m still coming up with some awful normals. I’m guessing it’s something to do with my models but what do I know, that’s why I’m here.
I couldn’t spend too much time on it, but I gave it a quick go. I unwrapped it to get rid of the mirroring. I’ve occasionally had problems with it.
Anyway. I created a cage (cage.001) after weighting the normals on the low poly. I expanded it a little (ALT-S) then tweaked what ever faces needed to be covered. The reason is so that you get minimal clipping as the mesh starts to balloon. There’s still some left that you could tweak a little more. But the cage combined with weighting the normals seems to be on the right track.
One thing I didn’t do was mark the seams on the low poly, as sharp, before baking. It might help with getting a cleaner result. So give that a try. You may need to re-weight the normals after doing that.
Exploding the mesh is a good way of ensuring there’s no transfer from one surface to the next. But Unfortunately the meshes are contiguous. So that’s not possible in your case unless you make some edits.