I think the issue with that is that you then need to pay out for new hardware to keep the guest server completely separate, plus you will also need new mods and admins only for the guest area (I doubt many would want to be in a world that is only full of guests). Also it means there there will be no communication between members and guests, and guests won't be able to see the main server - whilst some people find guests annoying, pretty much everyone was one at some point and they can't be expected to integrate well in the community if they are kept so far away from it before being made a full member IMO.

yes... kicking players based on latency is a pretty terrible idea

Also if you are assuming that high latency players connecting is the reason for lag, its not. The server doesnt put out extra upstream for players further away, it just takes longer fot the packets to arrive. Does not affect performance for anyone but the specific user...

What could help is straight up not allowing guests on, but thats got a negative side to it as well.. Boost the hardware, shave off unneeded plugins (they add up...), make regular donations to the lag gods