Set netspeed to what is applicable for you (probably LAN)
It is possible to "lag" without a high ping, you can have sudden interrupts or temporary high pinging packets that would stop the gameplay for a moment.
Running it from SVN would not have altered anything, OLX does not modify any variables unless you do it in config, at most it would have created new configuration options (if there would have been any new in svn, but there are not), which would have been ignored by versions unable to understand them.
The server is pretty much a relay in normal play situations, it doesn't really simulate in the way you are thinking of ~~..
But if you turn on Server Sided Health however (it might be removed soon, I'm unsure) then the server will handle kills & deaths on it's side (i assume this is one of the points you were wondering about?) and kill players when the servers sees it as a kill.
SSH is very unfair thou, as you see what is happening since you are on the server with practically no delay at all, and the ones playing on your server can get killed without really even seeing what killed them.