What exactly do you mean by cut outs?

Is your wheel true enough and spokes correctly tensioned that the wheel doesn't flex the magnet too far from the sensor when you are going around curves and such? The sensor arm is not more than a couple mm from the magnet? And does line up with the little line on the sensor?

I have one bike that the chain stay is so close to the wheel, that I had to put the sensor arm up like yours. But if you can fold it down that might be better. I had a bottle come out of my bottle cage after a bump and as it was happily falling between my crank, wheel and the sensor it broke the arm off. If the arm had been down, I likely wouldn't have needed to get another. Though luckily, while chatting up a bike shop owner, he just happened to have one he'd replaced for the newer type sensor and gave it to me.

One of the things I did that resolved a lot of issues with the GSC-10 sensors is to change the auto pause setting from zero, to when less than 3 MPH. If I'm less than 3 mph, I'm about to fall anyway. Even the walkers I sometimes have to stay behind briefly are going a little over 3 MPH.

I also wonder if your magnet is backwards. Are you certain that is the side with the strongest magnet pull? I also have mine oriented so it trails behind the spoke in it's normal direction of rotation. But maybe that's too finicky to worry about and really be an issue.