So I am not even on SMP5, however, performance on SMP6 at least, I am not sure about the other servers drops very drastically during Mob Arena events. I cannot even do the Mob Arena because of it leading to a system meltdown every time I have tried usually ending in a BSoD error.. ..In regards to the lag though, this is extremely dangerous for me while I am trying to farm Quartz in the nether (I go from about 30-40 fps to about 5-8 fps whenever the events have started) because for me at least the lag causes ghast spawn to seemingly stack and I am running around trying to avoid cannonballs, flames and lava.. >,<
Sorry this has happened to you but I don't think this is a server problem because it doesn't happen for me or other players that I talk to during mob arena.
I have a pretty low performance computer, I average around 30 fps, and I have never had issues either participating during the mob arena or being on other servers during that time.