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Can I set up a server on my computer, and have a friend, not on a LAN connection, connect via IP over the internet? The public server seems very sluggish, I believe it is in Europe and we are in the US.

Unfortunately this is not possible or at least nobody knows how to do it.
See this post question number 7 and answer. I wrote there a bit more about it.

http://www.slightlymagic.net/forum/viewtopic.php?f=70&t=15170

Sandman1278 wrote:Can I set up a server on my computer, and have a friend, not on a LAN connection, connect via IP over the internet? The public server seems very sluggish, I believe it is in Europe and we are in the US.

The public server is located in france (hoster is OVH).
If the server is running for a longer time, there is often some increase to response time. I'm currently investigating this to fix and/or improve it.
The server is restarted daily at 4:00 CET. So it would be interesting to know if it's also sluggish if you play on it a short time after the restart.