The lag discussed here is entirely server side. They could redo the game engine to be the greatest thing on earth and it would not help this lag at all.
One things worth noting: I had almost no lag ever in Diablo prior to 2.3 launch. Now, menus lag, sometimes buying from Kadala lags, etc. This is new. My connection is otherwise brilliantly clean at 200/25Mbps. Something is amiss in general.
I do thing at least part of the lag is due to the game engine and yes, also how the server handles calculations.
Over all, good game engines handle large amount of data better than poor ones.
D3 is not keeping up with its own development because it is based on a decade old platform.
Also, network speed is possibly the worst metric to determine the quality of your connection (packet-loss etc).
There are various issues at the moment that players wrongly assume is all related to this issue (ISP problems yada yada).