For maximum mining performance, is it better to minimize latency from the mining rigs to the p2pool server, or from the p2pool server to the Internet? I'm setting up a p2pool server to mine Scrypt-based coins on.  Mostly just for myself, but occasionally some friends will jump in.  I'll mostly be mining newer coins with very low difficulties.  I'm wondering whether I'd get better results by:


Locating the server at home with my mining rigs, which would give extremely low latency from the rigs to the p2pool node, but higher latency from the server to the internet through my crappy home DSL connection.


or


Locating the server in a datacenter, which would give higher latency from my mining rigs to the p2pool, but lower latency from the p2pool server to the internet.


I guess the question boils down to "For maximum mining performance, is it better to minimize latency from the mining rigs to the p2pool server, or from the p2pool server to the Internet?"
Are you aware that there is no 2nd option in your post? :)

Despite that, your second 1. option is better. If connection to the miner is one of the poor quality ones, p2pool will just adjust the share diff accordingly, decreasing the theoretical penalty.

However, if connection from your pool to the Internet is poor, it doesn't matter if you find block or not - it can be orphaned anyway, especially with altcoins with wrong low block time.