SH4 LAN lag / rubber-banding problem

Torpedos and enemy boats suffer from rubber-banding (moving forward then jumping backwards a bit).

Hello all. Just put that sentence first for when people roll-over the heading to get an idea of what I'm on about.

Me and my friend played SH3 to death over LAN. We were really happy when SH4 came out.... until we played it. SH3 played smooth and without incident (even with the increased resolution hack that came out).
We currently play games like ArmA II with no network issues, but each time we forget how bad SH4 was, we install it and *boom* we uninstall it.
We just assumed that they were using good 'ole Microsloth networking (as Motocross Madness 2 was awesome except for the networking). I went looking to see if anyone else was having this problem, but it seems not.

The torpedos are subtle, we only noticed them when we were in 3D view and watched as my friend completely missed a ship because the torp "gave way" to it.

I had a frigate dropping below the waterline, then bouncing back up to the surface. I dived as it came toward me and was under the distinct impression that it rammed me while I was at 30 metres.
I believe it might only be the client that is affected (so in the Frigate example, I must have been letting my friend try as server).

SH3 didn't have any of these issues.
The computers involved are playing current titles with no problems.
We have had computer upgrades on both computers involved between a couple of iterations of "maybe it wasn't that bad".

We recently came back to playing SH again and saw there was going to be a SH5. We're playing SH3 at the moment, but won't risk SH5 after the unplayable experience we had with SH4 (ok, who am I kidding, we'll probably take a look).

After having a look around these forums, it appears that we are the only ones suffering from this problem.

Has anyone else seen any issues in multiplayer or is it just me and my friend?
Anyone know how to fix it.