I had that surging thing on my first attempt to put a TCS decoder in a Kato 11-105 chassis. Did a warranty return, a second warranty return, sent it to WM Lee, he confirmed it and couldn't fix it either, finally scrapped the decoder out and put in a DZ126T and those have worked great. TCS tried and failed to resolve it. So it's not your imagination. Mine was only at slow speed, but truly aggravating when you're doing a geared steam build. Never seen it on another decoder since, between Digitrax, BLI, Tsunami.
I'm assuming you've confirmed that you can disconnect the decoder and jumper it around to test it on regular DC and it's not the motor.
I've also noticed a BIG difference in performance in speed control between my original Digitrax old school Zephyr power station and the new wireless throttles. Those are much finer and more stable control ranges.