If I locate a web site in TX and access it mostly in London, what is the lag time? What about other way around. How about between 2 very well fiber connected places like London and NYC?
Does distance matter and how much?
Unfortunately it's really not about distance but about the service providers in between. Some service providers with locations here in the US could have worse lag times from TX to NY than other providers have from NY to London.
Just in principle, if 99% if your traffic is in London, you need to get as close to London as you can to provide the best experience possible to the majority of your users.
Some tips I've picked up so far...
First, as a general guideline, go ahead and add 100ms to latency times for going across the ocean in your planning. This comes into play especially with TCP where everything is pretty synchronous, so for example, the more individual images you have on your pages at one GET request each will add up here.
Second, make sure your provider has multiple paths and try to locate your stuff on a route-optimized network.
Third, if you do have assets of significant size that will be transmitted, consider moving it closer to the users or employ a 3rd party CDN solution.
Edit: Just for kicks, visit www.news.com.au. I believe at least some of this is hosted on a CDN, while if you visit, www.whatsoninsydney.com.au you will see the difference. In my case it's a 10ms ping time vs. a 238ms ping time.
Distance does definitely matter. No matter how large the pipe, it takes time for the data to get from place to place. It typically takes data about 3 microseconds per kilometer traveled so for every 100km traveled it's 3 milliseconds. Then add in the latency for routers, switches, etc and you've got the minimum amount of time it'll take for the traffic to get from Texas to London.
Distance matters, even within the US.
It depends on what you are serving up though. If it is just web pages, most people wouldn't notice a huge difference if they are fairly small. If it is video or other high-traffic assets, then you want to get as close to the users as possible (possibly using a CDN -Content Delivery Network- to distribute files).