I have a 1.5 Mbps Internet connection and I play SL at 300 Kbps yet I consistently see my packet loss indicator half and full red (about 3-6% packet loss). I used to play at 500 Kbps and got nearly identical results. Stepping down to 300 Kbps didn't seem to make any difference. Since my connection allows for five times the bandwidth I give SL, and since other Internet apps take full advantage of my bandwidth with no issues it seems like I shouldn't see much packet loss at all.
Any insight?