I have this same behaviour and am unable to run LFS in multiplayer on my i7 system.
I also have an intel i7 920 (4 cores @ 2667 mhz), GPU is different however, mine is an ATI HD4870, and my motherboard is a Asus P6T Deluxe v1 running winXP SP3 32bit.
All drivers and system patches are 100% up todate.
It has nothing to do with my internet connection because LFS runs perfectly well on my laptop which is only an Intel Core 2 Duo T9300 @ 2.5GHz but it uses the same internet connection and runs perfectly.
Single player is ok with the i7 but in multiplayer my car hops about all over the track, it´s like when you watch a driver on a server that has lag and you see his car pop about from place to place, I get the same thing with my own car which is just crazy.
With network debug on I see the same error as the OP, TCP ER : InitTime -= xxxx and then a number that just keeps getting higher and higher and higher until evenually, all other cars freeze and get a lag number above them, and after 3 or 4 minutes of this, I get disconnected from the server.
It´s very dissapointing that I can play this on my 17" laptop but I can not play it on my i7 with my 30" Dell monitor.
Is this a known issue ? Are the devs working on a fix ?