I dont know why this is, but Okami always starts off flawless. That is until you get to a broken bridge. A cutscene will start and Issun will draw the bridge for you to cross. After the cutscene of him drawing the bridge, your shadow just disappears. I tried setting the blending unit from basic to high, nothing changes.
Did you try any other options, like the "Preload Frame Data" HW hack?
And did this always happen or is this a regression?
Nope, preload frame data doesn't help. As far as a regression or not, I'm not sure as I used to play this game with SW mode exclusively until recently when OGL HW started getting more accurate. But the thing is, if I trigger this event in software mode, his shadow doesn't disappear, it's only in OGL HW mode that causes the shadow to disappear after this event.