I'm running 1.8-pre2 vanilla server and today I noticed the video display is jerky. It's not that noticeable, but it;s definitely there. I copied the world over to single player and the problem goes away. Items smoothly flow past me as I walk.

Walking through tall grass in the plains an I notice that grass moves past me in small jumps or pulses. I'm getting a consistent 160 to 180 fps so this is not your typical server lag. It does not matter if I run, walk or sneak, I get the same little pulse about twice per second.