The FF wheel wiggle phenomenon actually seems to be a result of the tyre deformation simulation.
If you imagine you are stationary, and you apply brakes, the contact patches are now stuck to the ground and the wheel cant rotate forwards and backwards.
Now if you steer in one direction, the steering geometry results in both the wheel twisting around the contact patch, but also wanting to roll a little bit forwards or backwards depending on the caster, inclination and scrub radius.
But because the brakes are on, the tyre stretches rather than rolling, then when you let go of the wheel, it springs back.
You can feel this in a real car if you havent power steering, but in a real car there is lots of damping in the system from the tyres up to the steering wheel. In LFS there doesnt seem to be any damping in the tyre spring deformation model, and that combined with a bit of FF lag seems to allow the spring back to lead to a never ending oscillation.
It could probably be fixed by adding some damping to the tyre deformation code, but thats probably not a simple thing to do without messing up some other part of the tyre model.