completely different game, but since I mentioned how perfect this mechanic works in another game, I'll share a video of what it SHOULD work like in FFXIV, so that it's clear this level of responsiveness is indeed possible in an MMO.

http://youtu.be/TD6jW5SsMh8?t=3m25s

the black stuff that happens immediately after the AoE circle is insta-death. notice the character very narrowly avoids it. If this were played on the lag present in FFXIV, the character would of died 5 times over.