Strange shadows

[Graylord]

It also tends to happen when the light is parallel with the surface. You can do a degree reduce it by adjusting the surfaces.

[mAlkAv!An]

These artifacts are known as shadow acne. It's a common problem if you want to use fully dynamic light with UDK.
What you can do is changing some .ini values. Something like DepthBias=0.036 / CSMSplitDepthBiasScale=1 will reduce artifacts. Different settings for soft shadows/shadow filtering can be helpful aswell.
Altering the CSM (cascaded shadow maps) values for the DoninantDirectionalLightMovable might also improve the situation.

[Snipe34]

stab in the dark

Are your textures very small, maybe, like 128x?

[dexro]

The only way to fix this is to build the light, but if I do that I no longer can do day/night cycles....
So what is wrong?