I've played it a quite a bit, the only time it lagged at all was when I got an SMS, and once when the IM client randomly decided to reconnect. Otherwise it was smooth (and really, those two things disrupt everything whenever they happen).

As for the resolution, no, it's not the best, but it's not distracting either. Given the choice of a high-res image vs making the game lag, I'd take the lower res with no lag. I think they've made a trade-off here, and it's one most people will agree with.