A test render up close shows lots of little waves. You know what - I'm claiming those are heat waves caused by the atmosphere.

This still looks good to me. I wonder if there is a limitation of how much the lens can magnify the object before the distortion occurs or if the objects distance from the scope is causing it. Is the distortion the same if the object isn't shiny or reflective? Would a character's skin, hair or clothing have the same effect.  Just throwing some questions out there that may indirectly lead to a solution.