I tested it, and can confirm.
Did you place any blocks on the nether ceiling? if so, this allows entities to spawn as well as mushrooms when you generate new terrain.
Works as it is supposed to, IT only takes away the number of "Enchantment Levels" which for 3 lapis, is 3. 2 lapis, 2. And so on.
The only software I am using is made by Mojang, I'm not using Hamachi, so it is a Minecraft issue, should I create a new report?
I am having the same issue, not sure if it's a bug, or if Mojang is just tweaking some stuff on their side. I just updated my server and client to 1.7.2 today. When I tried to log in, I got the 'Can't connect to server' message. I checked to make sure my exIP was correct and it is. So, that is definitely not the problem.
This still holds true for the current snapshot 14w05a. I've had a donkey and wolf both suffocate after I accidentally nudged them near a wall.