it's just important to separate server lag from network lag..
as most people said, it's also very important to have a very good network behind a decent server..
as for my experience i can say that:
Server Lag is mostly caused by CPU Usage.. this means that if u get a good processor and optimize as much as possible your server files and don't make it work badly u will have a decent playable server with very low lag.. in this case for server we are talking about a good optimized machine with os and possibility to manage also from another pc on which you will rarely make it do other things except running the game server..
The server lag ovviously can also be caused from other applications running while the game server is.. immagine having a medium quality server with the game server running for weeks using about 90% of the ram memory and about 30% of your CPU usage and suddenly it starts to scan for antiviruses... this ovviously will make the CPU hit for a few seconds the soil of 99% of usage causing lag..
I also would like to specify that having a super cool mega huge Quad Core doesn't mean nothing when the applications you are using are meant to work on a single core.. unfortunately you will be using the full power of multithreading on the quad cores only with properly compiled quad core applications..
As for Network lag we call everything that causes server lag from the network / connection side.. in this case for a smooth gaming u need to have A LOT of Upload.. and u dont have to stress the network device itself from doing other things.. (for example download with torrents or emule).. as for what i can say, most router and connection devices have a limit in the numbers of connection that they can extablish.. this limit must be kept as low as possible and i garantee that having a computer in a home network that using p2p programs means that you are killing at least 70-90% of the router connections slots.. (unless ovviously we are talking about network devices of a decent quality which costs about 1000-1500euro on which u will not get this problem).
hosting a server isn't just a thing that everyone can do.. or actually let me say it better.. hosting a good server isn't a thing that u can do without spending some money.. hosting a normal server instead means that u will not garantee who uses it that he/she wont get lag on it.. this is why there are a lot of store which give this service for you!
my conclusions in these years of testing server on an italian isp was that the best mix a normal non working person can choose is:
1- have a dedicated connection only for the server and nothing else than that
2- have good devices which allow to keep a connection working correctly and smooth
3- have a good home build pc which has more power on CPU and RAM and a good MB so that u can have a decent idea on how well and how fast things will run on its bus.. graphic card isn't important as u think..
bye
