Hello MarkZ00,
Welcome to Microsoft Community.
After I have completely read all the content you posted, judging from your description of the problem, it seems that there are some compatibility issues between the Arc mouse and the Flex keyboard?
This shouldn't have existed because they are all accessories developed by Microsoft specifically for Surface. I noticed that in your description, you mentioned that you had tried to update the firmware in the Surface App, but it had no effect. If you are still willing to give it a try, you might as well try manually downloading and installing the driver and firmware package compatible with Surface Pro 11:
Download drivers and firmware for Surface - Microsoft Support
Please be sure to distinguish which CPU your Surface Pro 11 uses, because there are two versions of Surface Pro 11. One of them is equipped with a Snapdragon CPU, and the other is equipped with an Intel CPU.
However, if your Flex works perfectly fine when you are not using the Arc mouse, then the problem clearly stems from the Arc mouse. Maybe I should suggest that you replace it with new batteries (two AAA batteries).
Considering that you have already tried to unpair and re-pair the Arc mouse, but this strange problem still exists, in fact, as community support, the suggestions I can offer are already very limited. Even if you check the event log, at most you will only find that there seem to be compatibility issues between them. To truly solve this problem, it is still necessary for the Surface technical support team to conduct a complete diagnosis of your Surface, Arc mouse and Flex keyboard. You can send your Surface to them for inspection by filling out a form:
How to get service or repair for Surface - Microsoft Support
By the way, allow me to add one more thing. In fact, I have considered offering you the suggestion of resetting the Surface (this solution is rather complicated, but if you are willing to give it a try, please make a backup of all important data). However, if all these problems are caused by the abnormality of the Arc mouse, then perhaps the most direct solution is to temporarily stop using it and instead switch to a cheaper Bluetooth mouse.
Best Regards,
Henry-N - MSFT | Microsoft Community Support Specialist