The lag and content moderation issues are being way overblown, IMHO. As is always the case, for every person signing up for a forum to complain, there are probably a hundred happy customers merrily going about their business. According to MM's own forum the current moderated content accounts for less than half of one-percent of published user created content, and the majority of that had penis monsters and other lewd/suggestive content. The "copyright infringement" stink amounts to a few hundred levels out of tens of thousands.
As for lag, as said, I don't have any problem with LBP, and every time I play there are thousands of people online playing. Every level has 200-400 people in it, and there are 25 core levels! The minigames usually all show 100+ being online, and there are another 30 or so of those.
Remember, a big part of the online is that one of the PS3's among your group is going to be designated a host. Hopping into someone elses Pod if they're an overseas player with a crappy asynchronous WiFi connection is going to cause problems.
