Pre 1.3, i could host an SMP server and play on it on the same computer with very minimal lag. Now when I try to join my own SMP server on the same computer that it is being hosted on (in 1.3) after about half a minute of playing, I get huge amounts of lag. For example if I type something into the chat box and hit enter, It takes a full 3-5 seconds for it to appear on my own screen.

Very very annoying. If you could find out why this is happening, that'd be great.