I believe we have some good news.
Windows 10, November Update (1115?) build version 10.0.10586 which came out just yesterday (Nov 12) was just installed on my machine...
Much improved! Not perfect, but the initial movement delay is down to 1-2mm of finger movement instead of 5-10mm.
I checked the Device Manager and the I2C HID Device is still a driver from 2006 (no change), but it does have the new version number applied (10586). Same with the HID-compliant touchpad.
I can no longer move my finger in little circles and stare at the non-moving cursor fixed on the screen (and not moving with my finger). I still get a small initial delay, but the improvement seems to have been enough to overcome the pain threshold I was experiencing with the old behavior. I believe it is possible for me to not notice the delay anymore with this build of Windows.
Awesome.
If anyone here experiences the same, please post. Also, if you see no improvement with this build of Windows, I suppose you could post that as well.
PS: Last Saturday I tested all of the Surface Book and Surface Pro 4 devices on display in the local Best Buy. I'll probably do that for the next three years :-) Just to make sure I am not going nuts.