It was laggy... but pretty darn fun. Grav gun was dominant, but not as dominant as you'd think, since everyone spawns with a machine gun, at least where I was playing. My favorite weapon is a large, metal desk. A nice touch is how kills are indicated by icons... with the icon for "knocking someone on their ass with a tossed object" being a flying toilet. That's class.
I can't say how much lag was the game / server / my computer struggling, but there's definitely promise. I bet the physics objects are a HUGE stress on the server. It's fun to play catch with objects... seems like the bigger they are, they harder they hit, but the easier they are to intercept, too. I tossed a bin at some dude, and he used the push blast to send it right back at me and knock my head off. Ace move.
Fear the toilet-kill.
It's still crap that you have to wait so long to "validate" to play SP every friggin' reboot. Could you imagine the noise if the game wasn't just so good? With all the money they make, you'd think Valve could afford enough servers to not shut down their forums every time a big event happened. Though perhaps that's more a "feature" to them than a flaw.