That is absolutely the culprit. Any split or imperfection on the blade edge will cause turbulence the results in cavitation. That cavitation translates into a direct loss of turning engine HP to motion.
At minimum, you could file the edges to get rid of the lips and splits. This will reduce the turbulence and allow the water to have a laminar flow.
As for the wear ring, same applies here as it just creates a lip to induce cavitation.
If you are OK with this loss of speed, you can leave it as most likely it will not affect reliability short of possibly some more vibration forces on the bearings.
If it were me, I would put a new impeller and wear ring.