It scrolls smoothly, it doesn’t snap line by line. Although once the scroll animation is complete the final positions of lines and columns do end up aligned to a grid.
Neovim (as opposed to Vim) is not limited to terminal rendering. It’s designed to be a UI-agnostic backend. It happens that the default frontend runs in a terminal.
LEDs should last for tens of thousands of hours. There may have been a manufacturing defect in OP’s case.