For anyone experiencing the problem where the game loads only a few chunks, doesn't allow world-interaction then kicks you with the error after about 30s, you're probably not experiencing this bug.
I had the above situation due to my University internet connection unintentionally breaking Minecraft internet traffic. My University Minecraft Society are using Hamachi and I personally am now using a VPN to bypass the University filtering which works well but costs, not sure if a free VPN would be reliable enough.
To conclude: In the above situation the error message seems to be a legitimate one as opposed to a bug. Using a VPN will fix it.
I'm experiencing something different. Any server I join will instantly stop loading chunks so that there's only the few I spawn near, then after 30 seconds I disconnect with the error message. During my "connected" time I can break blocks but they don't drop anything, can't see people etc.
Also, I'm at University using their internet so I'm worried that might be affecting it somehow.
I'm getting this. Version 1.7.2 on Linux using OpenJDK 1.7.0_40. I'll join a server, it will load the starting chunk but nothing more and after 30 seconds will disconnect me. "Internal Exception: io.netty.handler.timeout.ReadTimeoutException.
@Talvern
Wow, well I wasn't aware of any such thing and apologise for bringing it up.
@Smikis
I don't know of any other solutions for my particular situation, however I do think that the error is being caused by my network and not as a bug, at least not in the same way as most of this thread. Could your internet connection be limited in any way similar to mine?