For fast moving things outside of ego motion, I can see a reason to use blur (e.g., your hand waving).
Indeed, it's almost impossible to turn your head slowly without your eyes fixing on points in your field of view, and then saccading to the next point. Try it. This is a hard-wired response. (You can perform some tricks to do it, like completely blurring your eyes, but that's not really the point.)
Meanwhile, if we watch a video with the camera turning, it's easy to keep our eyes staring straight ahead.
This shows that there is going to be a difference between a head naturally turning and watching a video of a head turning.
I think you're describing saccades as just being the "dropping out" of frames, and not including the extremely-relevant motion that our eyes do during a saccade.
I think the only thing I can say here is - I dont see anything weird when I turn my head, and when FPS games added blur to "character moves his own body", it felt much less natural, not more. So, to answer question a few posts up "how would we do it?" I'd just say "The way we always have before we got enough GPU to make everything look like a movie"
Actually I think motion blur is more of a (futile) attempt to hide low frame-rates because we don't have enough GPU to render the ever more demanding scenes.
You say it yourself: "your brain compensates for saccades by censoring input for a while. And it has built-in motion stabilization which allows you to read a sign while walking down the street."
This isn't the best test since your brain compensates for saccades by censoring input for a while. And it has built-in motion stabilization which allows you to read a sign while walking down the street.
A better test would be to look at your finger or hand while waving it very quickly. You'll see motion blur as your finger moves. In certain cases, you can see individual "frames" as an afterimage. E.g, if you look at a modern car tail light, the LED isn't on consistently but uses PWM to blink really quickly. So if you move your eyes while looking at a tail light at night, you'll see a series of dots rather than a blurry image. Once you learn this trick, you can distinguish between analog lights and PWMs by noticing if they are blurry or discrete.