Looki's Background Offset shader. It takes the red and green color values out of whatever image you apply the shader to and modifies the position of the background behind it, kind of like a special lens. By different colors I mean instead of using red or green (which the shader offsets the background with, Red for X Green for Y, this can be found in this shader code itself) I used blue and fuschia. For example, when the shader works as it says it should, the image for a distortion effect might look something like this:
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but using this, it will either blur horribly like the image in my first post, or do nothing at all, seemingly at random. Tinkering around, I managed to get it to work as intended (smooth distorted background) using an inverted version of that image, which makes no sense considering how the shader originally works (supposed to only use R and G values to change background):
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And the shader worked properly when it came out quite some time ago, so I imagine something changed in fusion builds that affected it.
The shader file i'm using is the updated one converted to DX11 by pixelthief, which can be found in the "converting shaders to dx11" thread. The problem existed in the old dx9 version of the shader too, at least for me and a few others.