MtGox should refuse to take orders worth less than 1ct. * 2 ^ seconds_lag. This way people can't arbitrarily cheaply keep the lag up.
But that will actually make the problem worse: your trade didn't go through... so you keep retrying and retrying until your trade does, or the system crashes under the load.Ok, I don't agree with you on that but there is another problem:
If I can effectively put 100000 orders into the order book with one bitcoin, I can put these orders anywhere into the book and they will affect the resources needed later when things get busy. The problem are not the small orders entering the order book in busy times as these are fast to execute but the big orders hitting all that dust, that is where the engine takes time to do all the book keeping.
Therefore, the small order rule would have to apply at any time, so a 100BTC order doesn't have to eat through 100,000 orders but "only" 10,000 at max.
Actually 80 minutes of engine lag cost MtGox customers and cost the Bitcoin value which essentially also costs MtGox profit. Sadly these flash crashes are when MtGox makes a killing that very day but still I'm sure they loose with this lag on the long run, so they should evaluate the real costs of each position in the order book and charge that to their customers as a minimum price per position. Or if they trust on people keeping to spam the order book even lower the fees for all others at the same time. A penny bot is not profitable because it buys valuable bitcoins at the right price but because it manipulates the price for other merchants that take "last price at MtGox" as a measure to price their goods and services, so these bots will not care about some small fee but those spamming uncharted parts of the order book with pennies, they do care and will adjust their behavior.
Never a dull moment in the Bitcoin ecosystem.
