"...so people who only care about throughput (ie, servers)..."

Basically, the "performance degradation" is that you get an interactive user interface, but copying some file might take 30 seconds, instead of let's say 25 seconds.

The thing is, no normal user cares whether some file copies a couple seconds faster or slower. What does matter is the perceived speed of the device. You don't want to be missing your phone calls, because the OS is currently busy with some disk operations and can't be bothered to show the phone UI. And even if that UI eventually is displayed, you can't use it, because all your input has 10 second lag.

For example, take a look at the two browsers of N900. While the Firefox may load and render the web page faster than Microb (when measured with a clock), it's the latter one that feels fast and responsive.

Start copying something to the phone using scp and try to use the phone at the same time. Or start downloading podcasts using gPodder.