The problem is if you shard it out you'll run into issues keeping each shard synchronized to within <100ms precision.

I'm not suggesting sharding it, I'm suggesting that almost everything in the sim can be set up in an embarrassingly parallel way, take advantage of 4/12/whatever cores, and lower the amount of slowdown.

physics simulations like that in EVE are far from embarrassingly parallel. Especially because the 'balls in space' physics simulation needs to be deterministic and synchronised between server and client.

There isn't much physics simulation besides direct user-induced velocity modification (or macro'd velocity modification, e.g, orbit-at-n-kilometers). It's not like they're calculating n-body gravity here.