Forge version:
Twilight Forest version: (1.12.2-3.8.689r)

The twilight forest itself isn't laggy at all, but the mobs inside the dimension seem to be laggy as seen in this video:

https://streamable.com/du6n5

Is there any way to fix this? The mods I was running while doing this test were:
BetterFps 1.4.8
foamfix 0.10.2
Optifine HD U C9
Twilight Forest 1.12.2-3.8.689

Forge Version is "forge-1.12.2-14.23.5.2768"

this seems like normal serverside lag (esp since your view distance is above 16 and more chunks keep loading during the video)

Even when I go afk for a bit in the twilight forest and then hit a mob again, it stills lags like that.

could you take a profiler run with spark profiler (https://sparkprofiler.github.io/) or the vanilla profiler (/debug start, wait a minute or so, /debug stop) and post it?