Action-conditioned world models let an autonomous vehicle predict future camera scenes from its own planned controls, enabling planning and simulation without real-world rollouts, but at compact, trainable scale the futures are ambiguous and the field's standard distortion metrics actively mislead: they reward a blurry regression mean over a realistic prediction. We confront this with a compact latent world model that, given the present front-camera latent and a sequence of ego-actions, predicts future scene latents a frozen decoder renders to $256 \times 256$ frames up to 8 seconds ahead, evaluated on 150 held-out nuScenes scenes. We first benchmark where to predict: across six frozen encoders spanning four representation families, V-JEPA2 with temporal context reduces steering RMSE by 40% over the best single-frame encoder. We then train a latent Diffusion Transformer (DiT) and, through a controlled diagnosis, identify the four ingredients it needs: spatial tokens, the $x_0$ objective, residual anchoring, and sampling matched to target uncertainty. In a Stable-Diffusion-VAE encode-predict-decode pipeline we expose the central tension: distortion metrics (cosine similarity, SSIM) favor the blurry mean, masking that the diffusion model is far closer to the real frame distribution. Inception-based FID and KID reveal a clean perception-distortion frontier: diffusion attains KID 0.078 versus 0.375 for regression ($4.8\times$ better), and a deployable train-derived calibration makes this practical without test-time ground truth. The model is genuinely action-controllable (steering drives scene displacement, Spearman $ρ= 0.81$, vs $-0.18$ for regression). We trace limited single-pass motion to a shared-present anchor and engineer a compact 1.7M-parameter "jump" model that recovers full ground-truth motion magnitude ($1.02\times$ GT), where single-pass models capture less than half.

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