Kris Cloutier

Antti-Jussi Kovalainen, I was able to resolve the issue by removing the mineshaft.dat file previously stated in an above comment. My file was bloated to 1.6MB.
It would saturate whatever memory I had allocated to the server. If it was 2gb, it would saturate to the max 2gb allocated. 3 or 4gb made no difference.
I would recommend attempting this fix and seeing if it resolves your issue.
To prevent this, I pre-generated the map to +/- 10k using minecraft land generator, which is farther than we care to go at this point, then removed the mineshaft.dat file and let the server recreate it. now the file sets at 114KB size for a couple weeks now.
I believe if we begin exploring, the newly generated terrain may cause the mineshaft file to freak out, but at that point, I will just pregenerate the terrain to +/-20k, then remove the mineshaft.dat file again. I am hoping that will lessen the dependency on me babysitting the server.
I believe the mods haven't closed this issue, because they haven't identified the root cause of the mineshaft.dat bloating in the first place.
Hope this helps,
Kris

Here are my home server specs:
AMD A8 3850 2.9ghz
16GB RAM
8GB Map generated to +/- 10k,
Server on RAMDISK
2GB RAM allocated to server
100MBPS up/down data
Server and client view distance set to 8

I cannot explore without severe lag. I only host between a maximum of 4 players online at a time.
I uninstalled all Java, and reinstalled only the 64 bit version Java 7u45, moved server to RAMDISK.
it's not possible for any of the players to explore without messing up the server.
When exploring, especially in the jungle, I'll get spammed with extremely high lag. Running 11124ms behind, skipping 222 tick(s)
Sitting in the jungle (just one user, me, no other users logged on) it will "idle" around 30% CPU usage. Entity count is something like 4/70-120. Once moving, the CPU usage will spike up, causing the "Can't keep up" messages.
Sitting in a large village in the plains drops the usage down to below 10%. Entity count 68/187.
Also sitting in the plains where cows and sheep are spammed in high quantities (233/388) the usage still sets on the server at around 10%.
The second highest usage comes from dense forests/mega taiga biomes which will idle around 20% usage.

The only thing I can really equate the server lag to is the amount of foliage (vines/leaves/grasses) maybe that uses some type of transparency? Since entities really don't play a part on this particular issue it doesn't seem. that puts a higher client load, but not as high of a server load in my particular situation.

I have been running a home server since minecraft beta, and have never experienced this issue.