Had this problem yesterday in the big 1500v1500 strat battle on EU3.
Game was running smooth on 75fps (capped at 75) but every time the two melee forces clashed, the fps dropped to about 40-45, which should still be perfectly playable and smooth. Yet all the player movement was transitioning from slow motions to speed ups every second or so. It's like the game was freezing like I was playing on 2 frames per second, but not completely freezing, just slowing down and then when the slow down stopped, it quickly speeded up back again, which made it unplayable for me.
Max settings.
Out of the melee clash it was working fine. Latency looked stable (35-40ms).
So I'm thinking that this is a WSE2 / graphic settings problem. I never had FPS or any kinds of troubles in big battles before the WSE2. I have a decent machine that should be able to run this without probs.
To be honest I don't even know what half of the new WSE2 graphic options do. There's no explanation for them. I don't know whether I should use them or turn them off.
GFX card: ATI Radeon HD 5870