The lag compensation is what causes the problems, if they removed it then the people with dodgy connections wouldn't be able to do anything.
I play competitively, online and offline (LAN events) as i've said before in here. I'm not going to bore you with the details, but some players are renowned within the competitive community for being "connection players".
You know that guy who you shoot first from long range with an ACR, and then he kills you with an SMG before you can drop him?
In public games it's annoying, but it competitive play it's ridiculous. These players run round making stupid game changing kills because of their connection and there's nothing you can do about it except moan. All of a sudden, you go and play at LAN and you can kill everyone just fine.
I couldn't play Black Ops online, the connection was just unreal for me. I went to compete at a LAN event with my team, and I suddenly found that I could outshoot almost every player on the game and we ended up coming 9th-12th out of 60 teams.
COD4 was better for sorting the connection than MW3, I don't understand why it's gone backwards.