Players frequently get disconnected from the server. Only one or two players need to be active for this to happen, mainly when breaking blocks.

Much of the time this appears in the logs:

[11:42:34] [Server thread/INFO]: forquare lost connection: TranslatableComponent{key='disconnect.genericReason', args=[Internal Exception: io.netty.handler.timeout.ReadTimeoutException], siblings=[], style=Style{hasParent=false, color=null, bold=null, italic=null, underlined=null, obfuscated=null, clickEvent=null, hoverEvent=null}}
[11:42:34] [Server thread/INFO]: forquare left the game

Sometimes it's not too bad, a player can move about the world for quite some time before being booted after breaking a block.

I ran a CraftBukkit server on the same hardware up until 1.6 and didn't experience any problems, and early 1.7 releases were fine for a month or two of fairly high activity.

Attached is my server.properties