Client side lag is only on the users end, i.e. you could have client side lag, but I may not, when we are both in the same sim. Client side lag can be caused by things that cause your computer to do alot of processesing, such as particles, alot of objects, things that cause your computer to work really hard, bump mapping is another thing, so alot of shiny objects might have a negative effect. Other things that can hurt/help client side lag is your internet connection and/or your computer, faster computers can "draw" or handle more on screen, so they can handle those 2 thousand particles alot better than a lower end computer, same with internet connection, if you have a slow connection you may lose "packets" (information about objects and things in world), or experience lag from things sending/recieving slowly.
Server lag can be caused by all sorts of things, scripts that take alot of memory from the server, physical objects that send the server into a "deep think" (a physics problem that takes a long time to solve or can't be solved), alot of people in a sim (actualy this can cause client side lag also), and even the more objects you have in a sim can contribute some to the lag of a server.
The reason you may be expireincing overlapping server lag, and this is just my guess, is because every sim actualy overlaps eachother by x amount of space (not sure how much), this is so things like crossing a sim can be handled better, and so you can see the objects in the other sim (i think). So you may be getting lag thats carried over, you could try standing in the middle of the sim and see if you still get the overlapping lag or not.
So how do you prevent lag? Well lag is hard to totaly prevent, but for client side, try not to have alot of bump mapped shiny objects in one area, try to scale down on alot of particles in an area, try not to have alot of high resolution textures (as the download from those can also contribute to lag), and cut back on un-needed sounds (downloading alot of sounds can cause lag also). Server side, scripts that use alot of listens can hurt lag, or scripts that otherwise cause the server alot of processing (such as high math scripts), alot of avatars in one area can also hurt the sim, alot of objects, and alot of physical objects (especialy physical torus) can cause troubles, especialy if they intersect. By "alot of objects" I mean a *real* lot and in one enclosed area.
Now some of that may be incorrect, but thats all based on what i've heard or made out of common sense myself.
Hope that helps out some.
