Network Settings and Custom Skins Option?
 

In the options menu is 'Network'

1. What should this be set to for MP - ISDN or LAN?

2. What does the 'Customs Skins' Checkbox do (I have disabled it)?

1. Try ISDN or xDSL. Do not use LAN, it may cause server lag. Not only for you but for others. Especially with more than 40 players flying. People using LAN btw can be a reason for all server lag we have now.

2. Custom skins enables you seeing custom skins of other players. It increases network load and may cause microstutter when you attack someone or you are attacked (when skin actually is shown to you). However in the recent patch skin loading procedure is improved. Disable it if you have any network lag or instability.

I thought the lan setting only allowed the game to see servers on your lan.Internal ips only.You could not join a server on the internet if it was set to lan.

Mine was set to LAN and I was able to join games with it on that setting. I'm pretty sure I had set it on ISDN, could the patch have changed this?

Thanks Ataros, I originally had LAN but changing to ISDN seems to be much better.

I am going try MP with 'Custom Skins' unchecked as I am sure 'custom skins' are causing me performance problems.

Try changing this line in your conf file

[NET]
speed=100000

to a lower value like

[NET]
speed=8000

It might reduce server lag.