The Orange Box on Xbox 360 is definitely amazing, but Team Fortress 2 players have also been complaining of amazing lag, so Valve has released an update that it reckons fixes it.
Chief amongst the TF2 enhancements in the new patch are reductions in network bandwidth usage, improvements to overall game performance, and adjustments to the search facility so ranked games are found with greater ease and results are set to favour preferred host conditions.
You should find yourself downloading it next time you fire up the game, thanks to Xbox Live's mum-when-you're-ill ability to know exactly what you need.
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