There is an issue that causes invisible characters. I'm not sure if it's due to lag or some some kind of sync issue between client - server - client. While the video shows this issue in 1.0.5, the problem persists in 1.0.6. In the example video, Davz Not Here is running towards me. Although I see him, he does not see me.
There have been numerous times where I have been killed by an invisible player. I will hear gunshots right next to me, turn 360 degrees to locate the shooter. I'm unable to locate the shooter, even though gunshots are still going off right next to me, and eventually get killed.
Also in "party" bug hunting, several of us have had the issue where one cannot see one or more members of the "group", while others can see everyone fine.
(Note, there are other issues demonstrated in the video, such as crazy bouncy players and trees showing for one player but a stump showing for the other. I have not yet confirmed these issues persist in 1.0.6. I am only reporting on the invisible players in this report.)