Hey, excuse me if I am wrong but my impression is you’re essentially doing
render to texture and not baking to a separate lo-res right?
The reason I suspect that is because you say you have subdiv UVs on
and the bake appears to be extremely smooth at the silhouette.
Assuming I understand the situation correctly the only way you can make this work
is if you disable smooth UVs so you’re doing render to texture to the actual UVs of
your lower subdiv level.
In addition to your margin setting you also need to clear the background color to (128,128,255).
There was another thread about the disasters of clearing normal map backgrounds to black.
That is more of a filtering seam issue though.
