I tested out a few different combinations and have come to the realization that Lightroom is terrible at slideshows. They have come a long way since v1 but the entire slideshow module is still just a bolt on "extra" and they don't give it enough attention for many reasons I could complain about.

I found some of the same odd inconsistencies that you found. In some cases, the arrow keys do not work properly. In other cases, I found that a 100 image slideshow rendered within 3-4 seconds, but a 400 images slideshow took 4-5mins even though both had 1:1 previews generated already.

Oddly enough, I really couldn't find much in the way of complaints or documentation on usage of the Lightroom Slideshow module. I think many people gave up on it some time ago and moved on to other options that are dedicated for Slideshows (but not good for on the fly presentation).

The only solution I have for you is to essentially do what you are already doing, by exporting JPEG only versions of your images, then importing those back into Lightroom and creating an actual slideshow in the slideshow module by using the "Play" button (not Preview or Impromptu Slidesshow). In reality, its no better doing this then just rendering 1:1 previews and using the Play button, as either way you are going to be waiting for some time. But at least this way you don't have to spend time in Picasa and go back and forth.