It's more glaring in my custom mesh but you can also see it in the included "crawler" mesh, Top is "textured" and bottom are "textured + lighting". When the lighting is turned on, the mesh distorts. Both of these examples are from the same exact view.
In the crawler you can see the neck silhouette has altered.
In mine...well it speaks for itself. Unusable levels of distortion.
I also tested the fpsautopistol mesh and it too distorts, though the distortions are not detrimental to its appearance.
The distortions carry over straight into the game itself.
I'm using the LWdemo in hopes of determining whether to purchase. If this is a demo-only issue, I would like to know. If not, I am concerned since I am a modeler/texture artist.