I've encountered the same problem. I wish I had the technical proficiency of those posting before me, but I can say with all honesty that CoH functioned perfectly well before i17, and i17 made it mostly unplayable.
I'm looking at the same scenario with frequent mapserves. I can rotate my camera while lagging, and I rubberband. It is not my ISP as all the other things I do, gaming or web surfing, function just fine. Also it is not my system because I turned graphics down entirely and still have the same problem. The game works smoothly graphically but I see 'connection based' lag.
I find that if I'm soloing or in very small groups (1-2 other people) I do okay, but I still lag a bit. The larger the group, the more frequently I mapserve. It doesn't make the game entirely unplayable to me as I can (for the most part) do okay in small groups, but it's irritating to miss a heal or get stomped because I have a lag spike.
If I solo with my Brute against x8 content I lag quite a bit, but I can finish it. If I group with a couple of MMs or with a large group, I am pretty much useless to my group.
This is game breaking for me because I love large groups, and I would like to see some form of fix up ahead for this. I know I have little information to offer otherwise, but this is simply a testament of 'Me too' to the OP.