I just replaced an ac2 with an ac3 - exact same configuration that I pushed with a script ROS 7.7 - wall mounted, same location.




What am I doing wrong?

Insufficient patience?

MT is known for being slow to get up to speed in wifi. It requires multiple good transmissions before higher speeds are achieved.
MT only takes small steps starting from the lowest interface rate. With the b-rates included that is from 1Mbps. Time connected is still very short here;

And I hope you have verified there is enough free channel room left for 40MHz in 2.4GHz (uncommon)

Thank you @bpwl - indeed the signal strength got better with time!

I have not verified that here is enough free channel room left for 40MHz in 2.4GHz - how should I do that? Or should I simply reduce the width to 20MHz and see what happens?

Use the MT to scan (or an APP on tablet or smartphone or testsoftware on a laptop).
Remember 20MHz channel is 4x 5MHz channels wide. Typical choice for 20MHz is channel 1, 6 or 11.

MT: (will disconnect clients on that interface)
in WinBox
Wireless interface use button "Freq usage" ,'Snooper", those are better than just "Scan"
in CLI:(Terminal)
/interface wireless> frequency-monitor
/interface wireless snooper> snoop
then select "f" , "s" or "n"

Windows:
Free programs:
inSSIDer
NetSpot
Wi-Fi Scanner (from LizardSystems)

Android device
Free APP's
Wifi Analyzer (Kevin Yuan) farproc tools, and more similar tools with this name from others
Net Analyzer (Jiri Techet) Network Analyer Lite

40 MHz channel width on 2.4 GHz will certainly lead to bad results. But you need to be specific about what you mean by "Bad wifi", your screenshot does not help.

my screenshots showed that only half of the devices elected to connect to the ac^3 and that the signal appeared weaker.
But this seemed to have resolved itself overtime.
I have reduced the channel width from 40 MHz to 20 MHz, and switched from channel 6 to channel 1 as it was bit less crowded by my neighbors.
Now I do have similar performance with the new ac^3 as compared to my now retired ac2. it is not working faster/better.

Side note. If you have neighbors at all, you can't expect much from 2GHz