If you're running the server manager (or rather server) on the same computer that you're playing you're game on.... that may be problem #1. It will work.. but your computer is dividing up it's tasks. It's running your game. Running the server... and in running the server it's running the game for whoever else might be on your server.. and if you're connecting to your own server.. you're actually going to the internet with your game.. which in turn is connecting you to your server on your computer.
There's a lot going on.. and if you're computer isn't built for it.. it can really task your computer in the form of lag.
Problem #2 is you're running 1.08.. Download 1.10 HERE (
http://files.filefront.com/swbf2sm110zip/;9281979;/fileinfo.html).
GL!