Yes there are problems with seeing mobs. I've had frogs apear right on top of me in PoS and also warp to me when they apeared far away and kill me in about two seconds. Lots of bugs with this new graphics engine.
Hehehe the mobs are falling through the world. They are under your feet and, if aggroed, will pop up and attack. Otherwise they go their merry way beneath the scenery. Great eh?
It does make for some challenging pulling. You can often still see the targetting ring on the ground, but no mob. Suddenly the ring will vanish and pop up (with the mob) elsewhere.