Solved, See next post.
I noticed the thread from last year with 1809
https://www.displayfusion.com/Discussions/View/windows-explorer-and-dwm-freeze-and-lag-during-wallpaper-operations/?ID=211f4b0c-04c8-45cc-bad3-c42886f93f49 and it seems to be the exact same behavior, but none of the suggested workarounds fix it.
I have it loading images from reddit for wallpaper changes every 30 minutes, each time, mouse cursor lag, freezing and typing doesn't work, instead it buffers all the text I'm typing, mouse movements and clicks, and then dumps them all at once when the wallpaper changes.
The transitions suggestions doesn't change anything, I though it might have been Aero color changes, but that doesn't effect it, and the real rub is that this happens on ANY computer that I've had DisplayFusion on, I don't recall which version of windows or of DF when it started.
I mostly ignored it until I had time to search around or post this request.
Also tried disabling application hooks, and trying the different aero color change modes, but none of those solved the problem.
Are there any new suggestions that I can look into? So far I've only used three different laptops in the last 8 months moving from one to the other with completely clean, debloated installs of windows before installing DF.
I don't have any other software that does anything with the wallpaper, theming, or window management installed.
Only thing I can think of is hardware variations, all of the laptops have been intel/nvidia with optimus auto switching. Happens on battery or plugged in. There were some posts in the official microsoft forums about even he windows slideshow causing the same issue, but their responses as usual were worthless. I'm pretty sure the MS forum is setup to automatically cut and paste the "why don't you reinstall windows?" answer on every single question.
Any ideas?