I had the same issue as everyone else. Bullet was supposedly interpolating the state but it was very very jerky. I noticed that most people solve this issue by using a fixed time step which validates my find.
I found that with my low resolution timer i was often computing a frame time delta of zero and passing that through the system. Bullet apparently does not like this.
I added a check to skip frames that have a zero time delta and everything is smooth as silk.
I'm glad too because i'm starting to like bullet and it was not looking good for a little while there.
I hope this helps anyone else having the same issue. Ensure that you're not passing a dt of zero to bullet and you should get smooth results.