Making progress.
Found a few new optimizations, meaning I had to redo World 1 a few times, then had to redo everything again on normal difficulty, the default difficulty, since hard difficulty lost a bit too much time on certain levels, and even on normal I cut it very close with the health.
When jumping in water, its better to not jump whilea bit submerged, which is why it looks kind of weird.
Also found that L+R kills your jump midair, which can be useful, L+R can also be done to cancel the damage animation, which is faster than jumping through or over hazards.
Also found an instance where you could walk in air, on Level 1 of World 2, but haven't been able to do it nowhere else, so it might be something very specific, not sure.
Uses BIOS Sega CD Model 1 US (v1.00) fwi.
Here's a quick encode.