I don't know the reason why Apple stopped supporting Target Display Mode. For Thunderbolt Target Display Mode, there was some software component involved - I supposed they could have made the software work with dual tiled displays with some extra work. You can tell the iMac and LG displays are tiled by looking at the listed DisplayPort connections in the AGDCDiagnose command output. For M1 Macs, the script at
https://gist.github.com/joevt/e862b0088ef58b9144877d01401bcee8 should tell you if the current display is tiled or not (uses two DisplayPort connections).
The LG UltraFine 5K displays were initially created with Alpine Ridge Thunderbolt controllers which are limited to two DisplayPort 1.2 connections (allows 5K60 10bpc). The new LG UltraFine 5K displays use the Titan Ridge Thunderbolt controller which supports DisplayPort 1.4, but DisplayPort 1.4 allows only 50% more bandwidth than DisplayPort 1.2, so it can only support 5K60 at 8 bpc (but the LG UltraFine 5K doesn't accept DisplayPort 1.4 input anyway, nor does it accept a pixel clock higher than ≈600 MHz). Dual DisplayPort 1.2 is 33% more bandwidth than DisplayPort 1.4 so it can do 5K60 at 10bpc.
A single DisplayPort 1.2 connection can support 5K30Hz (one person got up to 39Hz 8bpc on the LG UltraFine 5K).
There exist 5K displays that can take DisplayPort 1.4 as input. With one of those displays, DisplayPort 1.2 could do up to maybe 45Hz 8bpc. In Windows, 5K60Hz is possible with DisplayPort 1.2 using 6bpc. macOS doesn't support 6bpc, but it can do chroma sub sampling (up to 4:2:2 with DisplayPort 1.2 and 4:2:0 with DisplayPort 1.4).