yeah insulated is much better for lighting, but lighting normally causes client-side issues.
The 0,2sec Timers are known and they are disabled in the config by most servers. 1 sec is the fastest intervall most servers allow which is enough. Overintense abuse of fast timers also causes troubles in SSP, but you can compensate that far easier with a pretty strong machine. Normally you should use timers on an intervall as long as possible for the given process... but I've seen people running transposer on 0,2sec to emtpy a macerator that produces stuff a lot slower.
Wait wait wait. Red alloy wire can act as a light source? I never knew that. Weird!
Also the lag drop could be due to the fact that the insulated wires don't need to render a change in the looks of the wire since they're... y'know, insulated, and therefore, you don't see the powered/unpowered state unless you're looking at one of the ends. If that makes sense.
It's less of a light-source as normal redstone though, I think it only lights up blocks next to it while redstone actually has a intensity of 7, which causes a lot of blocks to light up, which can cause render-issues, but should not be problematic for servers, more for the client (at least I noticed that for a vanilla-timer.