I have an extruder hooked up to a millstone running a bit slower meaning the mechanical extruder always has a buffer of items. This buffer never seems to fill up though; I broke it once and received many thousands of cobblestone!
Maybe the extruder should only hold 16 of the item at a time and stop bonking until those items are extracted?

It should probably hold up to 64, not 16.

Either or - a lot of Create machines have a soft buffer of 16 items while they can hold 64. Anything below "infinite" would be great anyway thanks!