I actually fixed my problem within about 10 minutes of making that post. I changed the receive buffer size on my network card to 256 and set the transmit buffer size to 512. Works perfectly now. :biggrin.gif:
I had been running it as an administrator in xp compatibility mode (I'm on Vista) before, but after I made that change it worked fine. I think Notch needs to set some sort of limitation in the networking part of the engine so that it doesn't just spam more packets than it can handle.