Interpolation only works when you have microstepping set to x16.

The effect of higher microstepping depends a lot on the motor. When using 0.9deg motors, the gain from increasing microstepping beyond x16 or enabling interpolation is smaller than it is using 1.8deg motors.

There is a facility called coolStep in the TMC2660 drivers that can be used to reduce motor noise. It's configured in the M915 command. See chapter 5 of the Trinamic TMC2660 data sheet for information about how to tune it.

btw if you put your M92 command before the M350 command in config.g instead of after and use values appropriate to x16 microstepping, then you won't need to adjust the steps/mm in M92 when you change microstepping in M350.