Unfortunately, the stutter is caused by the fact that you have multiple objects crossing, and I presume that the arm is hiding a "decent" amount from one frame to the next... and the part is either becoming obscured or unobscured in the next frame. So what's Twixtor to do (remember it's working on 2d pixels only).
Well, it can either "gloop" pixels together. Which causes a bit of a wavy action in the background pixels if the foreground pixels are tracked properly. The other thing Twixtor can do is miss that the foreground pixels match up between frames, causing a stutter (or frame blending result).