There is possibly something very simple going on and I've probably fixed it with an overkill solution but here it goes.
Setup:
On my player prefab, the renderer and the collider are on two separate game objects. Renderer has the LagPosition script attached. Works great, no problems regarding jittering / stuttering whatsoever.
What happens:
Player1 enters the game.
Player1 moves it's avatar.
Player2 joins the game.
In Player2's instance, Player1's avatar smoothly moves from it's spawn point to it's current position instead of appearing in it's current position.
How I fixed it
I delayed the initialization of the LagPosition script. I set the mTrans, mAbsolute and mRelative variables a couple frames later so they get the synced position of the other avatars.
So is this a bug or am I missing something? At any rate, it's working now.