whenever the SMV Nemesis is within my view, I experience extreme lag (it is all but impossible to use the station menu when docked in a sector with it as well)

Can anything be done about this?

and why is the station menu cursor movement affected by the latency of the connection?

This isn't lag, it's your framerate, two very seperate things.

The station menu cursor is not affected by lag, it is affected by framerate, and even myself, with a very powerful video card, have a slow cursor when in-station.

There's an option to turn off the station in the background while in-station, which is what I have done, and it speeds things up nicely.

Maybe provide your video card info and the driver mode you're using in VO (eg, OpenGL, DX8, DX9). Your system may simply not be optimized or fast enough to handle the settings you're at.

Wes... if the Capship causes extreme framerate issues for you... then I'd suggest never going into a levi sector.

Levi sectors have much much more issues with framerates for slower comps.

-Zoras