If you're dialed up directly, you should be able to get a little bit better latency as you won't need IP, UDP, and PPP/SLIP headers; at modem bandwidth, header bytes add meaningful latency. But data transmission is still pretty slow, even with small packets.

Dialing-up a friend to play Quake, there essentially was no lag.

Dialing-up to the Internet to play Quake via TCP/IP...shit tons of lag (150+ ms).