Apparently the Nether isn't causing the lag:
''- Heavily increased CPU and bandwidth usage on multiplayer server hosts, causing lag. Beta 1.6.3 and 1.6.4 did NOT fix this problem like claimed!''
As well as the delay in light from torches and stuff:
''- Lighting is not always updated when digging new holes/tunnels, placing torches or setting blocks on fire (in both nether & normal world). Fixed in Beta 1.6.3, broken in Beta 1.6.4.''