Interesting. You think the Pixel Gear tracking is a wobbly?
Out of all the aim and shoot style games I have played I think it has been the sturdiest and most accurate. I think it might have something to do with you only using one gun/Move Controller. I know exactly what you mean though about where you "hold" the gun in virtual space. It's not exactly in your hand but I find once you adjust to where it sits its the easiest game to do headshots and just aim at a distance and shoot what you are pointing at.
The odd holding stuff in PG is probably by design to an extent. When aiming straight/upright, having the virtual gun higher than the Move allows to aim from down the sights without obscuring the trackers on the headset (since the top of the Move is at nose level more or less). But when you go gangster style (hold the gun sideways) the alignment is totally off. Like I have to rise my arm up/right above headlevel to get the sights aligned to my right eye.
That said, I think the laser sight in PG has a discriminating role in how you judge accuracy. In games with no laser sights such as Lethal VR you are more likely to do transitional/positional adjustments to aim at the target (just like in real life), which are affected by wobbling. With laser sight it's very natural to adjust your aim by
rotating the gun, which compensates the sight-target misalignment caused by the wobbling without you even noticing.
Also worth pointing out is that in Lethal VR targets can pop up right at your sides, and aiming in that direction really exacerbates the wobbling issue.
Lethal VR has been one of my most enjoyed games on Vive (our friends and family had a couple of get togethers where went in hard on score attacks)...But it just sounds so pedestrian, so boring, from you description. Where as when all of us played it, we felt like adrenaline fueled bad asses (there was a point where we got so good we were able to chuck 3-4 knives per target without missing).
Is it JUST from the tracking? Or are you not feeling the game?
I'm actually mostly ok with the tracking when using guns (as long as I'm aiming ahead), but throwing knives is a royal pain in the ass. I assume the robustness of Vive tracking allows you to enjoy the action in any situation where as the "glitchiness" of it on PSVR drags me out of the fun.