I talked to tech support and they had me make a new mxd and import my layerfiles from my old (10 or 9.3.1) mxd into the new 10.1 mxd. This fixed all of my snapping problems.
Also, they made me aware of a current 10.1 bug that changes your map's coordinate system after you add in certain basemaps (mine was when I added in Bing Aerial basemap). so check your maps coordinate system and make sure it is the same as your data. This will cause your snapping to be slow or unusable also.
>Is this performance bottleneck related to issue NIM069319 fixed with SP3?
No, that was a separate issue. The recent performance change was made to 10.1 only.
>At what point is the feature loading algorithm called/started?
Snapping is evaluated every time you move the mouse with a tool that has snapping enabled. This includes most of the editor tools and some outside such as the measure tool. Features are loaded as needed by the snapping environment. There's a bit more info in the developer help.
>Does the feature loading algorithm load features into the snapping cache for only the layers visible in the table of contents, or visible and non-visible alike, or those layers in the editable workspace, or some combination thereof?
All visible layers in the TOC that make sense (eg. not raster, annotation etc) are snapping candidates. Since its layer based it will also respect definition queries, scale thresholds etc.
>Does the feature loading algorithm load features into the snapping cache for the entire layer, or just what is inside the visible extent, or some combination thereof?
Features near the mouse location are loaded. Keep in mind a feature can extend way off the visible extent and this is one of the performance hits that we improved. Large complex features are the main problem here.
>Does the feature loading algorithm take advantage of field indexing?
It takes advantage of the spatial index and the arcmap feature cache if they are present. Performance improvements will vary here.
I think it has something to do with SDE's and not the vertices count, because I can export the Streets feature to Shapefile, and it works perfectly.