when you say lag is the server only doing the internet connection or is it a game server as well a dedicated server for the games mind you the spec's of the server is a little low what type of online game is it games like ut2004 doom3 quake4 counter strike
if you have a monitor on the server can you login as root and type the word top and have a look at how much ram is in use and the cpu load and do plenty of online gaming
would look like this to quite out of the top command hit q on the keyboard
seeing you are new to linux use a keyboard and monitor putty on window is a little bit harder to get to the shell as you have to enable remote access and that leaves you system open to hackers
top - 21:37:04 up 1 day, 18:51, 1 user, load average: 0.00, 0.00, 0.00
Tasks: 118 total, 1 running, 117 sleeping, 0 stopped, 0 zombie
Cpu(s): 3.7%us, 0.3%sy, 0.0%ni, 95.4%id, 0.5%wa, 0.0%hi, 0.0%si, 0.0%st
Mem: 1035324k total, 999300k used, 36024k free, 127816k buffers
Swap: 2562328k total, 168k used, 2562160k free, 457508k cached
PID USER PR NI VIRT RES SHR S %CPU %MEM TIME+ COMMAND
1 root 15 0 2044 628 540 S 0.0 0.1 0:00.36 init
2 root RT 0 0 0 0 S 0.0 0.0 0:00.00 migration/0
3 root 34 19 0 0 0 S 0.0 0.0 0:00.63 ksoftirqd/0
4 root RT 0 0 0 0 S 0.0 0.0 0:00.00 watchdog/0
5 root 10 -5 0 0 0 S 0.0 0.0 0:00.17 events/0
6 root 12 -5 0 0 0 S 0.0 0.0 0:00.00 khelper
7 root 20 -5 0 0 0 S 0.0 0.0 0:00.00 kthread
10 root 10 -5 0 0 0 S 0.0 0.0 0:00.14 kblockd/0
11 root 20 -5 0 0 0 S 0.0 0.0 0:00.00 kacpid
93 root 20 -5 0 0 0 S 0.0 0.0 0:00.00 cqueue/0
96 root 10 -5 0 0 0 S 0.0 0.0 0:00.01 khubd
98 root 10 -5 0 0 0 S 0.0 0.0 0:00.00 kseriod
157 root 25 0 0 0 0 S 0.0 0.0 0:00.00 pdflush
158 root 15 0 0 0 0 S 0.0 0.0 0:00.40 pdflush
159 root 10 -5 0 0 0 S 0.0 0.0 0:00.80 kswapd0
160 root 20 -5 0 0 0 S 0.0 0.0 0:00.00 aio/0
322 root 11 -5 0 0 0 S 0.0 0.0 0:00.00 kpsmoused