You can guarantee that the way they are fitting so many players on the server is by giving data transfer distance dependent LODs.
IL2 did this a little. you will see that planes that where far away from you jump about a lot when you play back a track. This is because their position and other data is being updated less frequently to save net traffic and prevent clients from becoming the bottleneck.
You can use these techniques all you want until the number of players on a server is totally dependent on the server's bottleneck (and not at all on the client's).
However, it relies on some planes being far away (and thus using less net traffic). this means that you may have a lag free server with 100* or 200* planes, but only so long as no more than 30* planes are anywhere near you. If everyone can see everyone else and so no other player is transmitting the lower net traffic LOD or update frequency, it becomes laggy.
That's not all bad tho. Just because you can't be near all the players at any one time, doesn't mean they arn't all contributing to your experiance.
*made up numbers
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