The problem was caused by the waits in start_server(). If you have a wait in a subroutine, then the routine where the subroutine was called will continue. A wait() doesn't block the routine from where the subroutine was called like a Sleep() in C/C++ would do!

I took a quick look at your code but actually I see no problem. Have you looked into the 3d chat example? It deals with exactly the same things you are asking for. Just compare your script with the 3d chat example (and read through the tutorial). Then I guess it should be easy for you to find the problem

Some hints how you could test out what the problem is:
1) Are the functions of the player entities called everywhere? (You could place an error("Function called!"); into the first line of the function)
2) Use the debugger to single step through your code (this is a bit tricky though, because if you are to slow then the connection to the server will be lost (because the client won't replay to pings from the server if you stop the client with the debugger). But you could again use the error() function to see if parts of your code are executed or not.