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The Displacement filter in Photoshop isn't a native 3D tool.  What is does well is to create a faux bump map, known as displacement map, to use in overlaying images so that they can appear to be displaced properly over the light and dark contours of an image.  The lighter parts of the displacement map will distort the overlay up and left while darker parts will distort the overly down and right. 

If you are getting the results you want from a standard setting, try adjusting the Horizontal and Vertical scale factors to meet your needs.  If you are going for specific portions of you over to act a certain way, you will need to build a custom displacement map to move specific pixels in the desired direction and distance.

I am curious, how did you displace the pixels in image 2?