Solved. I upgraded my ThinkPad to Windows 11 Pro - works fine with the dock now. Must have been a graphics driver issue.
I recently replaced a Lenovo USB-C Dock Gen2 that worked fine but could only deliver 60W with a WD19s (130w adapter model). Setup is: The 5420 works as expected. I can display 1080P and extend perfectly to the monitor at 3440x1440. The Lenovo works fine if only on the external monitor, but if I try to extend the laptop display the monitor reports the dock is outputting 3840x2160 (consumer 4K). I get a smooshed image as it obviously cannot natively display that. Another clue is that resolution (3840x2160) is listed in the drop down even when not extending, even though it isn't supported (the correct 3440x1440 is marked recommended). The laptop supports DP 1.4 over USB-C. and the Radeon Vega 7 iGPU is comparable in power to the newer Irix Xe 80 in the 5420. So not sure why this isn't working. Known issue? Incompatibility with AMD iGPUs?
Dell WD19s issue extending 1080p (laptop display) to 1440p UWS