I normally have 30-60 lag, but when I run my server (non-dedicated) when I get like, 8 people in, their ping rockets up to like, 500+. My max ping is on 500, so lotsa people get banned for 15 mins. What's the problem? Should I just run dedicated and join myself?

Its your connection that cant handle that much ppl set the max ppl that can join to 5 or 6.