Looking at the level shifter provided by Adafruit, their description of the device recommends applications with signaling frequencies at or below 2MHz. And, level shifting on those addressable RGB LED modules is rather finicky. So, I'm guessing there just isn't enough bandwidth to convey a proper signal.
So, I recommend the following:
- Change your 10k pull-ups [R1 and R2] to something more like 4.7k or even as low as 2.2k. This may speed the thing up.
- As Grumpy_Mike suggested, a MOSFET designed for lower voltages might help [the Adafruit version uses BSS138 -- but that's not to92, so something similar in a through-hole package--like, maybe VN3205 or VN10K].
- If none of that works, then. As larry_d suggested, do this in a common Source arrangement -- since it doesn't need to be bidirectional.