The reason for lag is very simple: Evony relies heavily on virtualization. A "server" is not a physical machine, but a virtual machine running the evony server-side software. When you are "merged" and "upgraded to a new server", what that means is you are being consolidated onto another box which, without a doubt, is also serving a dozen, if not more, evony worlds. Now, all those virtual machines are still serviced by one or more gigE links which eventually work their way back to the switch at the data center. Even if the physical server hosting a dozen worlds has 4 gigE links, you're still sharing those 4 Ethernet interfaces with thousands of other players.

That's a lot of packets.