The best way to test frame pacing are the various 240p test suite ROMs. The NES version is available here. You open 240pee.nes and use the hill zone scroll test on the second page. The bottom ground layer should scroll at a perfect 60fps. I just tested it with my Gsync setup and it looks dead smooth to me. The differences in my setup compared to yours is that I keep "Sync to Exact Content Refresh" on and I use the "Set Display Reported Refresh Rate" option in the video settings to set it to 119.998. My display can go up to 165hz if overclocked, but 120hz is a nice multiple of 30 and 60, so I figure it's better for watching video. Also I think there was some small issue with this monitor when running higher than 120hz, but I forget what it was.I should also point out that I'm testing with Super Mario Bros 3. The curtain opening is a really telltale sign as to how well paced the frames are. Is it possible SMB3 just has really poor frame pacing, essentially requiring some kind of frame buffering / vsync to smooth things out?
Also, if your monitor has an OSD option to display the refresh rate, that can be a good way to make sure it's activating. There's also an option in the Nvidia control panel to display an icon indicating Gsync is active.