Actually before I flew AH, I flew another WW2-sim online called European Air War, 8 player max. The net-coding was horrible with massive lag, but still it used the alternative to the collision system of AH. You could fly towards an enemy, dive well under him and still lose a wing from a collision. Fair? well, both took damage and since it was what I was used to I actully advocated for this solution back in the time I first started AH. (Knowing fully the dilemma caused by the lag).
To be honest I don't think it would change much which of the two solutions you use. Most would adapt if AH went the EAW way (not gonna happen), and there would just be regular threads on the BBS about "How come I died in a collision that didn't happen?" instead of the "How come my opponent didn't die in the collsion that killed me?"-kind