You might look into some of the plastic sheet materials, like polycarbonate (Lexan), which machines pretty well without the tear-out you're experiencing with the wood-based products. It's not the cheapest material there is, but you seem to be putting a lot of work into each one of these things, so investing in something that would look more valuable when you're done seems worthwhile. And if you're making small objects, you might be able to find scraps or cut-offs for free, from someone making larger things.