nothing says a displacement cant be dynamic, or part of a dynamic simulation! In fact most displacements ive used lately are.
(like nothing says a displacement has to move in the direction of the normal, thats not true either)
Making a lod in these circumstances isnt easier either. Offcours eit makes sense, since do you really need all the details, and can you use parametric surfaces isntead of polys, as especially prman renders them faster and more accyrately shaped with more details using displacement that a doubly dense poly.
PS. are you using a 64 bit system, if you are you could use prman porserver thatway your memory woulnt be a issue.