@GerryT I'm far from an expert in the area, however some people have suggested that Mutter has input event rate limiting that could be affecting things. Others have suggested that it might be that GNOME misses a frame when the screen goes from being static to having motion. Some have brought up the forced vsync in GNOME Wayland.
Personally, my guess is that Mutter is somehow delaying cursor position updates to the next screen refresh, while X.Org does it whenever and "races the beam". But idk.
@GerryT I want to highlight this comment I just saw from Lina from the Asahi Linux project: https://lobste.rs/s/oxtwre/hard_numbers_wayland_vs_x11_input_latency#c_edq7tn
It seems like my guess was more or less correct, Mutter (and other Wayland compositors) will sync cursor position updates to the rest of the screen in one atomic screen update, while X works similar to running the cursor without vsync which improves latency but might cause tearing and means that the cursor can be a frame ahead of the rest of the screen.
@JoeRess you may be interested!