Nvidia never said Vsync will be compatible with Frame Generation, they said the contrary from the beginning. That’s why you had to force it outside the Sim and outside all other apps and games managing Frame generation (as found by Digital Foundry).
It’s easily comprehensive why it’s not compatible. Doubling frames, and keeping them in sync with a monitor is pretty complicate IMHO. E.g. If you have 35fps without, and 70fps with Frame generation, how to keep them in sync with an external constraint like a 60fps monitor, without having an heavy stutter exactly once per second? You need to schedule in advance between real and fake frame and at the end be in sync? Pfffiiuuuuuu hard one, unless you have some room in your gsync monitor range (E.g. 40Hz to 80Hz), and you have to set your graphical settings to always land in the monitor range.
I hope they will resolve it one day, but it will be very complex.
The fact it was working before was probably a (good) side effect. They change the algorithm, we loose the vsync. So IMHO it’s not a bug, just a side effect of this tech.
Edit: to be clear I think it’s an Nvidia problem. One can try to downgrade the specific DLL for the Frame Generate. MSFS use the last one v1.0.5.0, nvngx_dlssg.dll. Try lower version available here: