I am not sure about how Oracle might be interacting with this process, but I do know that with the linear referencing part, from what you described, it seems you are displaying the event layer in the Silverlight application? When I view event layers in ArcMap (directly after performing the dynamic segmentation), they typically require a long time to draw for some reason, and I always create a shapefile/feature class after creating the event layer, and this eliminates the delayed draw time.
Are you trying to create a dynamic web app that updates as the road surface condition data updates?
The missing geometry probably has something to do with the data between the event table and the route layer the dynamic segmenation process is using. In one of those, the log points are not corresponding, resulting in missing/lost geometry.
Hope this helps. Let me know how this project is working out.