Right, it is back up and up for good*.
I've just had a quick blast from the PC itself, so obviously no network lag at all, but by fuck it's nice and fast and smooth :D
The Server is now running from a RAM Disk, and has 3GB of RAM to play with on top of that.
I have turned off auto-heal and turned on monsters, but they don't seem to be turning up. Just wandered around int he dark for a night and didn't find any, so perhaps i need to play with that some more tomorrow. But if you find any monsters let me know.
Finally, I've never played Minecraft on a proper PC before, only ever on the laptop. Big screen + fancy graphics + furthest view distance is like playing a completely different game :D