My Mercedes E-class has a setting where you can change between strict och relaxed (whatever the names were.)

In strict, it very closely keeps in the middle of the lane. That's not how I normally drives, so it feels scary. I usually bias away from oncoming traffic. It's probably fine on a wide highway, so this is more about me not feeling in control.

However, in relaxed mode, it seems to have the issue you're describing where there's too much slack, and it looks like it's playing pong between the lane dividers. Have the exact same worry about what this looks like to others...

It feels like different systems are better and worse at that. On my 2019 Honda Insight, it's actually pretty smooth and does a good job of staying in the center of the lane, but it won't turn the wheel too much -- if you're taking all but the gentlest curves, you're going to be turning the wheel. On my mom's 2018 Subaru Outback, it's exactly what you're describing -- it's fine in a straight line, but it doesn't really seem to judge the curve of the lanes as much as simulate a pinball. (I don't think I ever tried to let it take a turn on its own!)

I've only ridden in Teslas, not driven one, but it seems like it's probably got the best following/lane-keep system on the market, although the last time I rode in one -- admittedly about two years ago -- it was markedly jankier when the driver engaged more "self-driving" features, e.g., have it change lanes, take exits based on its own GPS guidance, etc. It was impressive that it could do it, to be sure, but it was the self-driving version of your reckless friend in high school you do your best never to ride with.

It's usually very good at staying perfectly centered between painted lane lines, even when following curves. This is fine usually, except when a lane on the right merges into your lane. In the United States, interstate highways don't always have any sort of markers establishing the non-merging lane. Because of that, about halfway into where the lanes merge, Autopilot considers that portion just one very wide lane and aggressively tries to center itself, rather than just keeping a relative distance from the lane markings on the left.

VW/Audi lane assist also "bounces" you off the side of the lane, but it doesn't send you so far to the other side that you bounce back. Overall the combination of lane assist + adaptive cruise does an okay approximation of FSD on highways.