sorry for the late reply, just checked your sample and I think the problem is actually not the fog, it's the noise
see something like this?
noise is dynamic in time dimension most of the time, and that makes it look less annoying in motion, and when you got large amount of noise in your vid, macroblocks will go random noise block alike, noise will be the dominate factor of SAD between 2 macroblocks and that messes motion estimation and compensation up, block matching works long as blocks are similar enough, and by "similar", that means the actual image, not noise, should be the dominate factor of SAD and SAD should be small, and in your case, block matching was screwed by noise, actually pretty similar situation like this,
http://forum.doom9.org/showthread.php?t=173705
and now because me/mc was fucked, the noise in your compressed vid goes almost static in time dimension, and that's the cause of "jerkiness", trying to figure out a way to cure this...