It sounds more like latency rather then fps lag. Let's start with the basics. I need you to ensure your firewall (both Windows AND any security program) are disabled for the time being.
If you do have a router, bypass it for troubleshooting purposes. Next, find out what your IP address is. If it still starts with "192.168.", then your modem is probably a hybrid. In that case, see if you can get your ISP to assist you with disabling the Home Networking function (also known as bridge mode), to obtain a proper IP address. Also, if your Windows environment is set up for a proxy, disable it and set the network up for Auto obtain IP address.
Once that's done, test the game and watch the results. If it improves, then you can hook your router back up and test it again. If it starts to rubberband again, try setting the router up with the proper port range opened. It also wouldn't hurt to ensure you have the latest firmware installed on the router, particularly if it's a Linksys router. One more thing, if your router supports SPI firewall, disable it. Most MMO games don't support it and you'll get all sorts of grief.
Once that's straightened out, you can reactivate your firewalls. Just remember that you'll probably have to remove MXO from the exception list and reallow it from time to time. Whenever there's a patch, the main executable will probably change and that throws off the firewall.
I hope this helps you.
Best regards,
Richard
