Don't see a realistic way to counter this at the moment without putting people with not so stable connections at a serious disadvantage. You always want to leave some room on connection drops. Maybe they could see if the network plug was pulled since windows has a built in value to monitor that.

Well right now people with stable connections are at a disadvantage because the unstable guy is just teleporting arround. If you loose connection with the server for more than 1 second your character should freeze.

This is going to get really abused in future

We've seen people intentionally abusing this on our servers. Hard to fix due to how ArmA is designed, the player pulling his cable basically becomes immortal since he does not receive information that he is supposed to take damage.

It would take me an hour of research and 10 minutes of coding to write something similar to an aimbot based off of this knowledge.
I thought one of the major engine design changes that were undertaken was to make the server the source of truth?

Well they already put a new anti-cheat system in called Battle Eye. Maybe this will stop it. Its in build 113953 if you want to check it out.

My cousin and I were victims of this yesterday. We were stocked with food, bandages, drinks, ammo and military gear. Someone must have scouted us at the airstrip because he was trying to pick up some boots he found inside a hanger and I was lookout. I just heard gunfire inside the hanger and saw sparks behind my cousin on the wall behind him, then nothing. We both got huge frame rate hits and I assumed the game had crashed and closed it. No "you are unconscious/dead" or anything. When I came back on, we were spawned at shore with nothing but flashlights. This bug should be high priority.