Ok so I played this morning for a little bit, got geared up bla bla. Now I wanted to play with two friends. I join a server, we meet up. I can't see him, no zeds are attracted to me, they just stand around. For me, at least. My friend can see me moving, looking around, even hear me. The zeds were chasing me on his screen. I can't open doors, I can't drop items, I can't move items around in my inventory, I can't pick items up. I also cannot quick access items from the bar on the bottom.
My friend tells me I'm lagging around, while our skype call is crystal clear and I get upwards of 5 MB/s in download.