Can you be any more wrong, seriously at least try to get things right.
It has 2x M39 20mm cannons, with 560 rounds split between them, they are functionally equivalent to the M24 and T-160 found on the F-100 and F-86F-2 respectively, yes it may use the same ammo as the M61 Vulcan but has a fraction the burst mass( ~1/8th the M61 per gun, using the same ammo), in comparison to other airframes it trades away half its burst mass in exchange for a hand full of additional rounds per gun, and subsequently more time on target, depending on your aim, and luck with spread this can be advantage, though you are far more likely to get hits, or miss entirely.
Uhh, you do get this thread is about the F-5C, not the F-5E right? The AGM-65 is exclusive to the tech tree variant and is absolutely on par with similar attackers in the 10.7~12.0 bracket, though is lacking CCIP means the pilot needs to actually put in the work to get the delivery profile(s) down right. and the most impactful A2G ordnance the F-5C has access to (for GRB) is obviously the AGM-12, which is carried by a number of airframes significantly below it in BR so they aren’t anything special, in terms of Fighter bombers either F-8 would be far superior option especially the F-8E for a slight increase in BR the expanded capacity is well worth it.
Not saying there is is absolutely nothing questionable things going on in relation to the DM, but this is additionally contributed to by a number of factors outside the DM(mostly to do with how HE / fragmentation damage is modeled), though its not in anyway exclusive to the F-5’s either.
Does it have a blatant impact on the survivability with the F-5’s? Yes.
Should something be done? Yes.
Its exactly what it was designed to do, and it pretty much conforms to knowns specs. The thing with the F-5’s especially is that their performance drops off significantly at lower speed, so instead of playing to their advantage you need to energy trap them like you would a MiG–17, -19 or -21 in most aircraft.
Its an advantage inherent to the airframe, not much that can be done about that, though taking any ordnance beyond the AIM-9’s should probably incur greater drag than it does, but is partially limited by Gaijin using generic drag data for stores instead of actual numbers, and additionally simplified implementation so drag is only accurate in a narrow speed band.
additionally as you have noted that The F-5’s performance falls off sharply as altitude increases, so surely there must be some way to use that against them.
Simply don’t take low Pk missile shots, and that isn’t an issue. Wait for them to focus on doing something or be distracted / low energy, most missiles at their BR won’t track them though maneuvers, and really shouldn’t be relied on to win fights outright but to force a response or catch someone out from an unexpected angle. During Vietnam Sidewinders only had a Pk of 14%, and the SSPK was even lower still, and practically none of the aircraft they went up against had flares.
A fault of how they have implemented a number of important things backwards and using various deliberate simplifications, generalizations and omissions in their implementation of the interplay between Flares, seekers Throttle settings, exhaust temperature and spectral radiance and generally gone about Missiles & Sensors as a whole.