Hi ,
The lag you are experiencing is something I would expect in this case. Foliage instances are all instances tied to one actor. When you move the transform of one instance, technically it has to destroy and recreate every foliage instance in the level, which would easily cause the lag you are seeing when dealing with 500,000+ instances. Once foliage is placed, it is not meant to be moved or edited at runtime, because when one instance is updated, the entire foliage actor, including every instance within the foliage actor, must then be updated. The functionality you are looking for is going to require a different system to implement outside of the foliage tool, as this is a limitation of the tool.