Not sure how the smoothing is done, but it looks like when the transform updates the graphical object snaps to a wrong position or rotation and then smoothes into the correct one.
It's quite visible here with smoothing duration set to 1 second: https://i.gyazo.com/67547fec865f9b5d8c96e89256ecacfe.gif
I know we've got some PredictedObject changes incoming and I know I'm 2 versions behind, but my game is live so I don't want to just update willy-nilly - only if there are changes/improvements on this front.