I've experimented with video games with various amounts of display lag or dropped frames; nothing blinded or anything (although, setting up a blind test sounds fun), and there's clearly an increase in difficulty the farther you get between input and response. Writing code is clearly not Mario Brothers, but small delays can add up.
Indeed! I don't have a problem using say a SSH console with 1 second lag. After a bit of initial cursing, it works just fine, I can write my code or edit conf files just fine. It's not as comfortable as writing at home, but it's not really a big deal.
However if the lag is inconsistent, say due to packet drops, it's horrible. Even if the base latency is low.
You get latency-free editing because the file is edited locally and sent to the server on save. Simple implementation but highly effective.
Having done some UX work in this area, I can say that people greatly overestimate the effects of latency on text entry when they're just looking at the numbers. End-to-end lag is more obvious in situations like dragging objects, but even then people manage to work around it.
Typing isn't performed on a tight feedback loop in the brain. We don't wait for the letter to appear on screen before starting the process to press the next key.
Typical human reaction types are on the order of 250ms for a simple visual stimulus. Recognizing letters will take even longer. A difference of a few 10s of milliseconds isn't generally going to be noticeable for typing unless you're really going to great lengths to A/B test.
Consider that people can SSH into remote machines all of the time with 100s of milliseconds of latency. The experience may not be optimal, but our typing doesn't fall apart over SSH.