Setting the connection to a lower speed (e.g. 56k, etc.) simply controls which RDP features are enabled or disabled - the lower the speed, the more features are disabled.
Citrix is supposed to do a better job of managing bandwidth and applications not really appropriate for terminal services (e.g. animations) but will still not be as good as local applications.
I have seen one situation some time ago with older Wyse WinTerms that have absolutely abysmal performance when the user is typing in a large rich text edit field (e.g. CKEdit, but I don't know if that's the actual one being used) in a browser on the remote session. We never found a resolution for that, but took the simpler route of swapping the WinTerms for a different model running a different OS. It's been a while, but I believe they were in the 5150 family and we switched between Windows CE and the Wyse thin client OS - I don't recall which version had the problem.
You say you're on an 8MB line, but that's presumably your download speed. What's the upload speed of the site hosting the terminal server? If you're on a VPN, what kind of bandwidth/performance do you get through the tunnel?