Originally posted by Yakumo_2020:

might be the fact that your using a dedicated server. And I'd bet your also using an IP address for the connect as well.

my friends and I had some very notiable lag issues like those described but those went away once one of us set up a dedicated system and stopped advertizing it on the clients server lists. We made the switch to direct IP connections when he noticed that there were litterlly hundereds of attempts per second to connect and guess the password. That added a lot of over head to the server. Once we started using the IP all the lag pretty much vanished. The game still stutters a little when the server does a world save.

Ugh, I could be such a goofball sometimes. I didn't consider that multiplayer doesn't always mean dedicated server, but actually one player opening up their own playing computer for others to join in.