@Bengineer I just grabbed a new production VZM30-SN and bound to an individual Hue bulb and it is working correctly. The things I changed as far as settings:
output mode set to 0 (this is dimmer mode) It doesn’t actually convert it to a dimmer, it just makes it act like a dimmer to bound devices.
smartbulb mode set to 1
Bound bulb on ep 2 with the on/off clusters and level clusters:
Is it possible that you missed one of these settings?
I can also test on z2m as things look a little different. Let me know if you are still having problems.