I downloaded the 1.2.3 update today and the following is happening related to lag issues:

• Render time is much slower and it took a lot longer to render major chunks of the view. Originally I started out suspended in air because nothing loaded except other mobs which too appeared to be floating in air.
• Turning or moving around caused a lot of choppiness in the display. I did not experience this type of choppiness in the 1.2.2 version.
• The more I played, the worse it got. In the end after about 5 minutes of play the lagging/choppiness was so bad it was giving me a headache and I had to stop playing.
• Exiting and restarting did not improve the rendering. It continued to degrade as before making the game unplayable.

I'm not sure how this got past the beta stages as it is so bad!