Peer's movement is choppy when velocity is changing

When connected as a Peer, you will notice that your movement becomes very jagged and jittery while accelerating. Movement will at times also be jagged/jittery while decelerating. I know that this issue is related to changes in the peer's velocity, but I have no idea as to what the actual issue is. I am hoping someone can help me figure out how to remedy this.

The Capx linked below demonstrates the issue.

When running the layout, press the “Join” button to join the game. Your ship will automatically rotate toward your cursor, and you can press “W” to accelerate. There is text at the top of the HUD to let you know whether you are the host or a peer.

https://drive.google.com/file/d/0B9tqOz ... sp=sharing

Updates (Things I've tried to solve/working around this issue.)

1. Are changes in the player's velocity not being communicated properly between the peer and host?

Tried enabling physics for the peer and setup transferable velocity x and y values but this did not change anything.

2. Is it related to physics?

Completely removed physics and replaced everything with a custom movement equivalent and got the same result.

3. Is it related to precision/interpolation of transferable values?

Tried maxing out precision and experimenting with interpolation, did not produce anything of value.

4. Did I set something up wrong?

I edited the "Multiplayer Game" example provided by Scirra so that holding "W" (input: 0,1) would cause the peer to accelerate toward their lookaty, lookatx coordinates. This resulted in the same choppy movement I have been experiencing.

5. Does the peer need physics/custom movement enabled?

I tried enabling physics/custom movement for the peer's character, and allowing them to move it alongside input prediction, but it did not change anything.

Does no one know why this is happening?