Hi all, first of all I'm not sure if this is the best section to create a topic like this in, but I think it is also network-related.

So my problem description:
I and a few of my friends are writing an MMORPG server (actually an emulator) and we've ran into a problem and that is - as the topic suggests - laggy movement. Even with 3ms latency. The type of movement observed from the client made us believe that the client itself has no built-in dead-reckoning algorithm and in the original design (probably) the server carries this burden. After receiving a movement packet, it's resent to all other players in the visible range, who see the player. From the client's view the moving objects starts running, runs for an about 1 second and then stops (with the running animation) until another packet is sent from the moving player to be dispatched. This creates a very jerky movement. I wanted to ask if you can tell what can I do/implement on the server-side to remove these lags, if you had any experiences with a problem such as this or have any ideas how to solve this. The main problem with implementing it is that I have only 3 things - starting coordinates, ending coordinates and current velocity, nothing else.
All suggestions are welcome.