Which pixels need to be darkened to shade off an object depends on the distance to that object, and will also block the light coming from other objects at other distances. It's very inconvenient.

The Magic Leap 2 does. It works ok. It's not as completely useless as armchair quarterbacks on line would have you believe. But it's also not the greatest thing. Objects are a little fuzzy around the edges and friend on the accuracy of the object surface detection. So moving objects can lag.

The LCD panel is too close and out of focus.

For example, close one eye and hold the tip of a pen about an inch in front the other and you'll see that it doesn't actually block any of the world.