The only true fix is to never use more than 2-3 Bluetooth devices with your Mac
Yes, very obvious advice. But hear me out:
I've spent several many hours researching this, and have found that no fix works for everyone.
A lot of articles online state that Apple has officially recommended to not have more than 3-4 Bluetooth devices transmitting to your Mac's built-in Bluetooth module at once. I can't locate the official statement from Apple.
From the complaints I have seen, Apple's recommendation mostly holds true. But, considering your unique environment and hardware setup , Wifi, house walls, etc., the number is not 3-4, but probably closer to 2-3 devices or 1-2.
In particular, it seems that Bluetooth mice, new or old, even Apple's own Magic Mouse or Magic Trackpad, are the worst offenders causing Bluetooth lag loop.
You want to either use a wired mouse, or opt for a wireless mouse that's connected to your Mac using a USB "receiver dongle", like the ones you get with most Logitech products, like "Logi Bolt" or "Unifying Receiver".
Inserting this USB receiver dongle into a USB hub that's placed as far away from your Mac as possible may also be necessary for some. A USB extender cable with one female USB-A end can be used instead of a USB hub.
Personally, I experience zero lag when connecting one pair of AirPods, or other Bluetooth headphones, and one Logitech MX Master keyboard directly to my Mac's Bluetooth.
My MX Master 3S mouse is connected via a Logi Bolt USB dongle, not via my Mac's built-in Bluetooth.
I know this advice is very obvious and very lengthy. I just hope anyone reading this understands that Bluetooth on all Macs and MacBooks, even the all the newest, Apple Silicon ones, M1, M2, M3, has these limitations and that it won't get fixed in an update or by changing a setting, running a terminal commands, etc.
*Technically, you should be able to pair up to 7 Bluetooth devices to your Mac. Just note that you probably have to manually shut down or disable Bluetooth on all of them except the 2-3 devices that you are actively using with your Mac.