Disclaimer: I have no idea how hard it would be to implement or if it would be possible to implement it at all.
Description of the problem:
Many residents connect to the SL regions with high latency (100ms+.) This has the consequence that moving in SL feels like walking in glue for many people. If you just tap the "move forward" key, you notice the tiny delay between tapping and actually seeing your avatar moving on the screen.
This is an issue on multiple levels.
1) This impacts the immersion negatively. If your avatar moves delayed, it helps creating a disconnect between you and your avatar.
2) It negatively impacts the potential for any advanced movement related gaming activities inside of SL.
3) It just doesn't feel great in general.
I recognize that there are viewer settings that try to mitigate the latency issue, like "Ping interpolate object positions", but they don't come anywhere close to fixing this.
How are other games handling this?
When I create a World of Warcraft character as EU resident on a north American server, I walk around with zero latency. There is no difference between moving with 20ms latency or with 200ms. You start feeling the latency only when you cast spells since the latency of course is still there, it just doesn't affect movement.
Potential disadvantages:
I can see potential disadvantages of moving with zero latency. Looking at a game like CrystalCraze, you would see yourself touching the crystal but the server will register the collision later than you see it happening. There are possibly more negative effects like this.
How would it benefit the community?
I believe that moving with zero latency would establish the base for the potential of any movement heavy games inside of SL. I see a huge potential for games inside of SL in general, and I know that there is currently a project to enhance scripting. It's just that moving in glue isn't fun and it in my opinion hinders that potential. It would make using SL feel better in general.