Not sure if this happens to everyone, but many people are being disconnected quite often, when the server keeps running. This is due to java failure. Due to the massive expansion of the game (height limit doubled) it now requires more memory. Here's instructions to increase the memory allocated to java, which should fix it for you.

Start

Control panel (for mac, go to the equivalent)

Select Java

select java tab

click on view

type in "xmxjklm" under runtime parameters. jkl is any number you wish it to be. i.e. 512 mb would be "xmx512m"

1Gb would be "xmx1024m"

2gb would be "xmx2048m"

to increase, continue along that pattern.

DO NOT EXCEED HALF YOUR MEMORY ALLOCATION. Example: I have 7gb memory total for my computer, I will only give 4gb total to memory. You can round up to the nearest gb, however... do not exceed that number. Doing so could cause a system crash, and you'd have to restart in "safe mod" and uninstall java, as every time you activate it your system will crash.

I used a different way to increase memory (screwing with the .bat file) because every time java updates, you will need to redo this process. I won't explain the .bat file because I didn't actually do it... my friend did it for me. Regardless, I hope this helps you all.

This will only have effect if your client crashes with Out of Memory errors. Most of the people disconnecting right now are due to lag spikes that exceed the timeout parameters on the game.

So when will this be fixed Darth, your the developer here so can you explain? My computer keeps shutting it self down and 'Lagging out' on Minetown? I will try Dunsjohns idea with the runtime though.

Duns do I HAVE to have Minecraft running at the same time as performing this?

Darth, when I was in game I was hearing a lot of people saying their java kept crashing. I have stated in the OP that it was a java error. I know that disconnect due to a connection is different than a java script error. Again, I had previously stated such in the OP.

I'm not really sure you want to run every application with those tunings. At run time, for specific applications, you can have java launch with parameters. MagicLauncher allows you to define these and manage mods for minecraft. The bat file is pretty easy. "C:\Program Files\Java\jre7\bin\javaw.exe" -Xmx2048M -Xms1024M -jar "C:\Users\Eric\desktop\minecraft.exe" Though you will need to point to your jre. I run fine with 2gb allocated to minecraft.