Personally never ran into a server lagging at all tbh. Given I rented a server through shockbyte I think and we had 5-7 people on all the time and after like 100 hours playing the game never experienced any lag whats so ever. So ima say the lag maybe was on your end rather than the games end.

No, that was (well, the question: is?) a common issue with the game server (software) written poorly for high instance count.

But I can see there were some user made fixes for it:
https://jamesachambers.com/revisiting-fixing-valheim-lag-modifying-send-receive-limits/

according to this post (2022. Oct) the problem still exists, but I'd like some feedback if that is not the case (to decide if we should try to play it again).

I don't know about lag, but my framerate plunges down to 30 fps when I'm in the big settlement on my server. I normally get around 90-120.

It's not much different than it was after release. The tweaks help but its still a peer to peer system with a server in between. The clients are the game managers and have to pass all the data around each other via the server.