I like the sharing of the info about the high resolution encoder, and would really like to play with one, but I'm not sure for what I'd use it right now.
I have an RM Young 26800 sitting on my bench, being fed by a 05103 wind monitor. I show degrees but will look to see if I can resolve the encoded voltage with a change in settings, but as I was looking at it, and the wind is only a few MPH right now, it does 'bounce' around at least 5 degrees about the most likely readings. When the wind is really gusty, it can deviate at least the 10 degrees noted, and the cardinal points of the compass which it also displays will change across two readings with some frequency.
I guess when you live where I do and there is major terrain turbulence within a few hundred yards each way, that will happen. It is fascinating to watch the actual monitors swing around and my wife accuses me of being strange watching the tower once in awhile.
I think smoothing might help, but then am I fiddling with the raw data, rejecting the swings because they conflict with my ideal of a steady breeze (maybe a reality in some open spaces, hard surfaces, or deserts) being very well directed.
Flags tend to do this a lot, too, but their mass is larger and does dampen some things out. I know wind socks can change from entering a pattern to land and by the time I get on final. My instructor/friend/plane-saver refers to this as conditions.