In turbocnc, yes the other axis pauses. There are no other settings (that I have found) to adjust the speed/time that it takes to do the compensation.
Mach2, it has a setting for backlash, but from what I read in the manual, and what I have seen when using it, it doesn't actually correct anything while cutting. The manual says something to the affect that it will compensate by trying to keep the motion goibg in one direction. I'm assuming this is for the wizards that it supplies. But the only thing I can think of that could be done like that, would be drilling holes. Someone correct me if I'm wrong please.
Not sure about any other software.