I have found myself working on cutting shapes into rotating objects with lasers may times and i have three suggestions to offer you
1. Problem: Algodoo lasers only cut when turned on/off or when they hit an edge
Solution: clone your laser and place it behind it pointing in the same direction. they should overlap. this will allow cutting all the time.
2. Problem: cutting too man chips at once will cause lag
Solution: position your laser below the circle being cut to allow the chips to fall with gravity so they will not be cut into small pieces that cause lag
3. Problem: Still lagging after doing the first two suggestions
Solution: make the ground or a object a killer and place it where the chips fall.