The issue is something known as the "Nagle  Algorithm". Anyways I'll keep it simple, this algorithm was created  years ago as a way of allowing a steady stream of data to use low  bandwidth. It was designed for older dial up modems to prevent online  games and other things sending large numbers of small packets from  filling up your entire bandwidth sending "ACK Packets". What this does  is automatically delay your computer from responding to a single packet  by 200ms which allows your computer to respond to multiple packets at  once using less bandwidth. What this essentially does, is add up to  200ms to your lag. If you want to know more, do some googling; I don't  want to bore you.
Anyways,  if you are on a modern broadband connection, you can DRASTICALLY  improve your Mabinogi lag by disabling this algorithm. I am unsure of  how to do this in Windows Vista, but in Windows XP it is a simple  registry edit.
1. Run  Regedit
2. Browse to  HKEY_LOCAL_MACHINE \SYSTEM\CurrentControlSet\Services\Tcpip\Parameter  s\Interfaces\
3. It gets  tricky here, there be a bunch of Folders with letters and numbers under  this Key, you need to find the one that is your network adapter. Browse  them one at a time and look for the ones with similar settings to your  network, such as if you have an IP address or a Gateway manually set. If  you are unsure, you could always just try adding the line to all of  them.
4. Add a DWORD named  TcpAckFrequency This is Case Sensitive. If it is already there, skip to  step 5.
5. Set the Value of  the DWORD to 1
6. Reboot  your PC
After this, the  Nagle Algorithm will be disabled.