That max capacity can't be right, you wouldn't get more than like half an hour of battery. But something is definitely not right.
I see your battery got as low as 2.54V, it must have been left for a while in a discharged state to get that low. The minimum safe voltage on lipo batteries is 2.5V, so it's still within safe limits (just barely), but the battery might have been degraded a bit, which would explain why you only get 2 hours. 2.5-3 hours is more typical. But it could just as well be normal wear and tear if you have been using the console a lot, or leaving it in the dock all the time. I think Nintendo claims 3.5 hours minimum but that seems overly generous to me.
If a lipo battery goes down below 2.5V, it's recommended not to recharge it, and many charge controllers will refuse to charge at that point, considering the battery dead. But it's usually possible to resurrect it with a very low charge current (you can buy special charge controllers for this), without any further damage than some lost capacity. 2.54v is borderline, but not much reason to worry.
Your battery % issues might be related to the battery being slightly worn due to having been discharged to 2.54v or it might just be normal wear and tear. My mom's iPhone battery is now about 2.5 years old, and once it gets down to 50%, it drains down to 0% very quickly.
Does it drain down to 0% quickly even from a full battery? If so that's strange even for a worn out battery.
Also what do you mean by "every few seconds"? It sounds like the % goes from 100 down to 0 in a few seconds and then starts over, and repeats, but I figure that's not what you mean.
