I have an external program that provides position, speed, pitch, roll, etc information to SimConnect. That external program is providing the data at 40ms. I would think that would be fast enough, but Flight Sim has consistent lags. Although the lags are not bad, they are enough to make it appear choppy. Does anyone know anything that I can do to improve the lag?

This may sound counter-intuitive, but try slowing the data input down. It may be that your program is interrupting the simulator so often that it's actually slowing it down.