In snapshot 14w07a, I'm having this issue, with the exact same message
Internal Exception: io.netty.handler.timeout.ReadTimeoutException
At least me and another person on our server can't log in because of this. But we can still see things like server description, how many people are online, and the conncetion seems normal
I've noticed this, too. For some reasons, squids also disappear, even though they're not hostile