What is wrong? It's undercut
I suspect it is a case of tool interference due to inproper offset of the path within the controller's rad comp routine.
The best way I've found to fix a troublesome path for radius comp is to fillet the internal corners of the 2d curve to match the tool radius. If the controller could execute the original path correctly, this is exactly what you will get anyways.
So where the tooth meets the root circle, fillet the geometry to your 1/16" radius. You might discover that you will have to do some manual trimming to get a good continuous curve.
Then, redo the toolpath on this new geometry.
First you get good, then you get fast. Then grouchiness sets in.
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)