Wow... Where to begin...?
Well, I remember playing a couple of games of FFA on CoD4, and really getting beaten badly for the first time since I got the game, by some guy called manbearpig or something. Of course, one of the better things about XBL is that you can check where other players are from, and this guy was from either Sweden or Finland (can't remember which, right now), but somehow, he was going 30-4 or 30-5 using nothing but a silenced AK.
I was sure he was cheating, and I sent him a message asking if he was, but he just called me a naab (which was apparently his version of the word noob), and carried on.
So anyway, I friended this guy to check his stats, and they were average! But when I played him, he was one-shotting me the second he appeared on my screen! It was after that time that I noticed that whenever there was anyone from Scandanavia in a game that I was hosting, they were basically one-shotting people, while I was using two thirds of a P90 clip to get a kill.
After that, I began to notice more and more the way the game worked and why certain things happened. There are a number of factors that determine how well you're likely to do in a match.
The bottom line is, and there isn't really any way around it right now, there isn't a single fair online match that you'll play. The only way to get a fair game is a local MP, and even then, you both have to be using wired pads...
Yes, the game does a number of different things to 'balance' each match. Having said that, it's not always completely predictable. I mean seriously, I could write a dissertation on this subject, but I won't bore you with all the details.
Anyway, the most obvious two are 'slowing down' the players with better connections when they play against people far away (like you've experienced), and modifying how much damage each bullet does, so that the players on the worse quality connections can get one or two shot (anywhere on the body) kills.
Even after that there are other things like spawn placement and even how effective your killstreaks are that I've noticed, too.
I know one player, who doesn't even know what his connection speed is ("it's BT I think, G1GS...?") and he usually has a k/d of about 3.50 or 4.00.
I went the other route, thinking that the better my connection, the better I would do, so I got 50mb Virgin cable. All that did was make me the host 80% of the time, but the 'Scandanavian problem' didn't go away. Actually, it wasn't just Scandanavia. Any lobby I had with anyone further from London than about Birmingham, and I could notice the difference.
Having said that, I kind of enjoyed it, though. It made me feel better at the game, because I knew that the other players had an advantage, but I was still winning. All I did was learn ways around it. I set up all my classes to try and get the advantage back on my side, and I learned to read the game and changed the way I played.
As for now, though, my main problem is with my mobile broadband cutting out mid-game. MW3 is putting me in Saudi only lobbies most of the time, so I'm getting a good enough 3 bar connection to have some more balanced games.
But yeah, the main point is, the game isn't fair at times, but until the whole world is on a 10GB per second connection, there isn't much we can do about it.
PS. To all PC gamers, from my experience, dedicated servers aren't much better than PvP, so no need to try and convince me otherwise...