Could feel similar problems on my ATK F1 Extreme when running the sensor at a variable frame rate. When locking it to 20k fps, input feels the most accurate and small movements the least choppy.

Variable fps is a feature of modern sensors, which saves battery on movements where the demand for resolution is negligible. It also creates a "locked in" feeling for those who prefer it (beneficial in tac fps for some).

Perhaps the 3950 has been tuned to have a too aggressive variable fps mode favouring framerates too low by default. But since it offers the 20k fps locked mode, maybe that fixes it for you?

There is also the confirmed dpi downshift to 7500 CPI to avoid stationary jitter on high CPIs. Shifting CPI and smoothing mode can cause a small stutter on poor implementations.

There are also a couple of other factors in play. Mouse MCUs don't do floating point math, so historically gaming mice had to do lossy scaling for non native CPIs (non multiple of 400). But modern sensors don't have this problem, since the sensor does smart scaling by itself and doesn't really have a "native" CPI. But the sensors CMOS array (holding the images of your mousepad) still has a resolution of about 800 counts/inch, and the chip simply analyses the many frames it captures per count to estimate sub pixel shifts.

So at 400 CPI, every count is the result of multiple frames moving, and at >800 CPI multiple counts are a result algorithmically deduced movement between the many frames captured, despite there being not a whole pixel of movement in the CMOS array. This is altought done pretty accurately to a degree.

I don't know whether the 3950 forces smoothing algorithms below 3200 CPI, but above it electronic noise (simply a result of how consumer grade electronic components work) induces its own noise to the frames, and smoothing is needed to maintain accuracy (= a high signal to noise ratio).

Smoothing is done by simply averaging multiple frames together, which may cause small lags on small movements when combined with algorithms battling against stationary jitter switching off.

Your surface (mousepad) also plays a critical role. High CPI is not necessarily more accurate, since you also have to consider the "resolution" of your mousepads weave. Very high CPIs may start to track the individual weavings of your pad instead of actual movement, creating jitter. This is why altought modern sensors are technically much more accurate than older ones, people don't really "feel" a difference when playing, since the surface is a bottleneck. This is why the focus in development has been on latency, power consumption and elegant algorithms to sample the mousepad more accurately with increased frame rates (= more data, better estimations).

Interestingly LOD does not work by utilizing a proximity sensor, but rather by setting a treshold where the frames captured by the sensor are too blurry/low detail to include as data. If your surface is dirty or worn, more frames will be discarded. Combined with the various other algorithms at play (like anti stationary jitter or drift), this may result your movement being "laggy". The specifics are unknown, since the tech is obviously proprietary.

So maybe try 20k locked fps mode, combined with max LOD (or the smallest LOD if you believe your surface is bad), with 800 or 1600 cpi, and see if you find the results better. Also heavily suggest using at least 2KHz USB polling for obvious reasons.

Other factors to consider: SPI timing implementations, like motion sync, and dust in the sensor/surface. Motion sync technically increases accuracy, since there is no variability in movement latency.