Good questions:
1) no
2) I'm using LASS 2, which requires K5
3) Small tempo jumps do not seem to cause a problem
Here is some other info I found. I currently have one VE Pro 5 instance for LASS2 with 5 Kontakt instances. As I start to delete Kontakt instances, the problem gets better (less distorted). If I get down to one instance, I *think* it is working correctly. This suggests a possible workaround of 5 separate LASS instances instead of 1 with 5 Kontakt instances.
However, I would still like to figure out the problem because this prevents me from getting the most benefits from VST3. I also have a huge template on other machines, so I need to reduce VE Pro instances whenever possible. Thanks for the help.