Hi Dan,
The S Spindle Speed Command isn't designed to work at high speed and to be synchronized with the motion. The Interpreter flushes the look ahead and so forth when it encounters an S command. So I don't think it will ever work in the way you are intending.
Would it be ok to use an additional axis as a "dummy" axis that could be used to control the intensity instead? If so an angular axis might be the best choice as it shouldn't effect the feedrate calcs of the xy motion at all. KFLOP could then output the dummy axis position to the DAC.
Regards
TK