Even with the crazy GIFs the actual FPS hit is minimal on the old PC client (that the clowns should have made the default client for PC, not some horrible flash client that ended up driving people away). Even then, I think the flash client could still handle it performance wise.
It was all done because of the induced network lag but I don't remember the details.
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Could it have been the number of concurrent downloads? Historically, most skins had been distributed with the client.
I'm mostly really sad that this game died before anyone thought to re-add my tree cave with the benches and the big fire pit.