Fact: We don't know the issues of lag.
I can take an educated guess and say it's because of lacking CPU power, because rubberbanding almost always is.
The reason why CPU power isn't enough is a different question.

With that in mind we don't know what's being used to host the worlds, is it metal, is it virtual?

Now they're having problem as is, the upgraded servers (if they were physically or virtually upgraded no one knows) show that lag is not such a big issue there.
Sarlona or Wayfinder compared to Thelanis, Thelanis is laggy.

Now imagine a "mega server", idk why you call it that, it's essentially a server merge of all servers.
This "idea" everyone keeps talking about it if they're longer time players.
But it's not the right way.
If you want a populared server, the community should pick one and make this their "mega server".

If you kill off the other servers you'll also take away opportunities to make quick DDO points, that's probably not an issue for the established players, but it is for new players.
New players need every DDO point the can get. Now you can say "I don't care about them" to which I'll say "I don't care about your issues either, I don't need a mega server"

As a developer and server admin I'll say that you should forget this "mega server" idea. Decide on one server and make it populated.