know what distance lag is, feel free to visit Scarecrow's thread HERE. I recently contacted Mr. Yamakawa on this matter wondering if there were any plans to alter the YSFlight network code to help fix this, here is his response.
I wish I could do something. But, nothing can travel faster than the speed of light. The light can go only 7.5 times around the world per second. So, if the server to client distance is at the earth's circumference, you cannot avoid 1/7.5 second lag.
If you are connecting between NY and CA, probably it is 7 times shorter than the earth's circumference. If you have nothing in between your client and the server, the lag will be reduced to 1/52 second. If you are in a bicycle simulator, you are in good shape. This lag will cause only less than 1ft difference. However, if you are flying an airplane flying at Mach 0.8 near sea level, 1/52 second lag will make 17ft difference.
It is the best case that you have nothing in between the client and the server, and connected straight line geodesic distance. In reality, network packets goes through many routers, and they are not located on a straight line. Also, each router takes some time to receive and dispatch a packet. Therefore, chances are, you will get an order of 1/20 second lag even when you are lucky, which will give you 43ft lag.
YSFLIGHT does indeed some interpolation and extrapolation to reduce the lag, but unless some theoretical physicists come up with a new theory that allows data packets travel faster than the speed of sound, it is difficult to reduce the lag further.
Some network games do aggressive path prediction to virtually eliminate the lag, but in those games, instead of the data traveling faster than light, the airplane in the game often travel faster than light, and you may see an airplane suddenly disappear and appear behind you. (That also happens in YSFLIGHT in a slow connection.)
So, it would be the best if you can get together occasionally. Flying a formation with someone connected to the same network hub is much easier than to do the same between Pittsburgh and Japan. (I did a few times and it was fun though.)