Well your download speed is not limiting you. Where most connections fall short is the upload bandwidth. People use very little bandwidth just running around doing normal things. When people zone however it spikes your upload bandwidth a little. Get enough people on your server with like 512 kbits up speed and you'll start lagging people. A dedicated server will be way less laggy, or at least should be just because of the amount of bandwidth they will have compared to you. Those little 5 kb spikes when people zone wont put a dent in a dedicated servers b/w.
Also if you are running off a home PC and need to download a file or something, it will lag people pretty bad, or slow your internet to a crawl if you get a lot of people connecting. It all depends on if it is worth spending $100 a month really I guess. A properly set up dedicated server is definately going to be less laggy than a server at home on Cable/DSL though.
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