I am experiencing the same thing on many laptops that utilize the microsoft precision driver. You couldn't have described the behavior any better.
The current laptop that I am trying to troubleshoot this same issue is the 12th gen intel Framework laptop. When attempting to quickly move the cursor just 5-10 pixels to move from one button to the other (such as the back and forth button on a web browser toolbar), the cursor moves but jumps back to the original position the moment a click is registered.
This seems to be an obvious filtering issue- now, I don't entirely know how the precision drivers work between device drivers and precision drivers but I have so far tried to change every option I can find in the windows 11 settings touchpad options as well as set AAPDisabled to value 1 in Computer\HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\PrecisionTouchPad registry entry.