After looking through many guncam vids I too find that MG hits are way too obvious in AH2. As far as I can tell from what I have seen, about maybe a third or so actually flash upon impact (I can not tell if this is due to different ammo types in the belts or due to random effects), and then its very short. Dont know if this actually transaltes into lag, since hits are registered on the own machine anyway.
FWIW, I think those dust-puffs and debris should be more or less the rule when striking targets with MGs.
Regards,
Matt