Version: 2.77 (linux 64bit)

How to reproduce:

1. Open attached file and inspect the grid object's modifers, weights and shape keys
2. Note how the vertex weight modifier has no effect on the resulting shape, when it should
3. Note how no feature that dynamically affects the vertex weight (dynamic paint or vertex weight modifiers) has an effect on the resulting mesh shape key

Expected behavior:

Procedural changes to a vertex group should affect the shape keys influenced by that group. Not being able to dynamically effect the vertex weight of a shape key is a pretty serious limitation. One can imagine a lot of uses which are currently closed to the user.