So I think I have some more info on this issue:

- The fix in this answer is most definitely incorrect. The shader has the pragmas.
- I originally filed a bug on this not working when instancing shipped. At the time, it threw an error about not having the instance ID in one of the shader stages. This bug was resolved as fixed in a future version of Unity, so I waited a few months for that to be released and retested. However, when I could repro in that version, the terrain was still transparent, but the bug was closed anyway since the error was no longer thrown.

When tessellation is enabled, the shader uses a different vertex function - which does not contain the terrain instancing code. However, when adding that code (or calling the regular vertex function), it still does not work correctly- the quad close to the camera works correctly, but the others do not draw.

Note that the surface shader only uses a single 'vertex' function, which is called after the vertex has been tessellated. In reality, there are two functions in the resulting shader - one in which the regular vertex is transformed, and one in which the tessellated vertex is displaced. But the current surface shader system only lets you write the second one. So doing everything here would be wasteful and slow- but let's put that aside for now.

A simple way to repro this:

Change the #pragma from:

#pragma surface surf Standard vertex:disp tessellate:TessDistance fullforwardshadows addshadow

to

#pragma surface surf Standard vertex:vert tessellate:TessDistance fullforwardshadows addshadow

This will call the original vertex function which does the terrain instancing code. Note that with instancing on, you still have disappearing quads, but if you zoom very close to one it will correctly display. Note that this pathway simply tessellates the mesh and does not do the actual displacement - if you want that, you have to add:

#if _TESSDISTANCE
i.vertex.xyz += OffsetVertex(i.vertex, i.normal, i.tangent, i.texcoord);
#endif

to the bottom of the vert function.

This is easily verifiable as incorrect. If you open the shader file, you will see the pragma's are added to both the tessellation and base shaders:

#pragma instancing_options assumeuniformscaling nomatrices nolightprobe nolightmap forwardadd