Thanks for your fast answers. Luckily thanks to a user on the Wabbajack Discord I figured out what was causing this insanely slow process. At first I thought it was Windows AV screwing me over again even though I have exclusions in place, but that wasn't the case.
The culprit software was AMD's Radeon Software (latest 21.12.1 release). I do not why it interferes with Dyndolod, but doing a driver-only install as suggested by that user fixed it. As you can see in the snippet below, it now started generating LOD after 1.5 mins, instead of 50 minutes, and is now going through the entire process at expected speeds.
I know below isn't the entire log, but as it is clearly not related to Dyndolod I didn't think it was necessary anymore.
[01:24] [Tamriel] Processing 729 child worldspace references
[01:25] [Tamriel] Generating object LOD
[01:31] Creating E:\Skyrim Modlists\LS3\_OUTPUTS\DYNDOLOD\textures\lod\dirtcliffgrass02lod.dds
[01:34] Creating E:\Skyrim Modlists\LS3\_OUTPUTS\DYNDOLOD\textures\lod\stockadeplanks01lod.dds
[01:35] Creating E:\Skyrim Modlists\LS3\_OUTPUTS\DYNDOLOD\textures\lod\dirtcliffgrass01lod.dds
TLDR: Crappy AMD software