http://img237.imageshack.us/my.php?image=packetswq3.jpg
The time format on the right is hours/minutes/seconds. This is during the log in screen, i'm not even in yet and its sending 6-8 packets a second... could this be a contributing to the lag?
My other concern is that the client also sends lots of packets when idling in game... shouldn't it only send packets when the client moves or does something, and maybe one every few seconds or minutes to tell the server that hes still there?