Here's a couple of points for you.
Half-Life deathmatch was VERY fun for people before all the mod's came out - this is what we were all playing.
Half-Life deathmatch's FPS are totally dependant on the machine you play it on. You'll probably find that it performs better than counter-strike now.
The server doesn't render the screen. Do you really think that the server has to render the screen?
Not all physical objects have to be server side and in sync.
The fact that half-life 2 has big levels and pyshical objects doesn't mean you need more than a normal dsl connection to play.