I haven't read the code for the auto feature, but I noticed this issue when just enabling/disabling the grid with the settings. Actually I read the code, assumed it would give performance issues when toggling the grid, then installed the mod and tested it.
But it has no quick way to toggle the grid on or off, so it doesn't really matter, it's supposed to be always on. Until I saw the update, now it has an auto toggling feature. So I was really confused and thought I should read the code and see if it was rewritten based on different ideas to enable toggling. So I'm about to do that and saw this thread while checking for updates. So I guess I don't really need to read the code now that I know there's no fix that would enable this feature to actually work.
This doesn't explain why "always" mode has the reduced performance though. It should only be in auto mode. Maybe the grid is recreated always in both modes, and just not deleted when un-mouse-hovering in "always" mode as the only difference compared to the "auto" code? (Edit: read the code, this is pretty much it. It loops through all chunks and rebuilds the entire grid whenever any player does almost any action in practise. Regardless of mode.)
I've been thinking about making my mod ChunkyChunks have the global grid (so it can be seen with map view far away). But there's quite tricky to do it with the combination of a toggle feature, configurable grid sizes and having it be performant. That's why STGL only has the chunk size and had no toggle while CC has configurable grids and toggle but it's not visible in map view. Both are performant (except for this bug), because neither manages to do it all.
Slippy, do you always get bad performance with "always" mode, or only when mousing over entities and doing actions that would enable the grid when in "auto" mode? Sounds like it gets worse with mousing over stuff, but what's it like for you after a while with no actions that would toggle the grid?
I guess I'll read the code and test it out anyways to unconfuse myself :)
Edit: I understand the problem with the code now that I've read it. Always mode should at least be fixable...