The only thing that's going to fix the lag is:
1. Rewrite the code, using qualified programers who document everything they do, finally eliminating the spaghetti code.
2. Compile that new code on top of a modern game engine that's actually capable of handling large scale combat.
3. Serve all that up from servers that are current.
4. Purchase enough bandwidth to handle all of the current throughput plus an additional 20% - 25%.
Don't hold your breath on any of that much less all of it. In the meantime, they could easily use Battle Spirit to disable ALL proc sets in Cyrodiil to test how that would improve performance.