If it's at all useful, there's an implementation of a fix here that we did in fabric: display-interpolation-fix/DisplayEntityMixin.java at main · Ticxo/display-interpolation-fix (github.com)
Interpolation isn't working because updateTrackedPositionAndAngles is directly setting position of the entity instead of setting the target location to interpolate towards (something that LivingEntities do). So we just implemented the same method LivingEntities use to fix the position lerping. For rotation since display entities handle it through the getFixedRotation method we just store the previous fixedRotation and return a rotation spherical-lerped between previous and current.
Not sure how to get a helper/mod to see this for visibility but I believe the "fixed" status on this is incorrect
https://youtu.be/kgN_f9VzlbY - Video directly on the snapshot that it is marked as fixed.
https://youtu.be/Qv2ROIIYblA - Latest Pre release 3 as well.
Both show the difference and that the interpolation doesn't seem to be a thing?
This issue was marked as fixed in 23w07a however basic testing is showing this does not seem to be the case https://youtu.be/Qv2ROIIYblA can this be reopened potentially to be looked at again?
https://discord.com/channels/154777837382008833/593812273164976166/1107942425613312020
This thread from the Minecraft Commands discord addresses this issue (to some extent) https://discord.gg/QAFXFtZ and the final outcome seems to be that he agrees some version of a fix will be added, just wasn't a priority. Alot of the math and decisions went over my head but someone much smarter than me who is plagued by this issue said that thread proposal from Boq would fix it.