Three things need to happen at the same time to keep your experience from being a total disaster: The note indicator needs to cross the bar bottom of the screen, the appropriate point in the song needs to be playing (the actual note, or strum, or drum hit, or word, or whatever), and a check to see if you’re successfully playing that note needs to be made.
All three of those factors are easily compensated for and synched with the calibration options. You figure out what the slowest part of the setup is through the user calibration, and you just delay the other two appropriately. It’s the feedback in response to your response (of hitting or missing the note) that causes problems, and how noticeable it is varies by instrument.
When playing guitar or bass, the feedback you receive for hitting a note is the flash of the little note bar, and the continuation of the song (or the miss and the silence from the audio track). If you have seriously drastic lag in the system, you’ll start to notice this, but it’s not too big a deal because the effect is just a bit of delay in the note on screen not lighting up for a miss or the interruption to the audio track coming a little bit after you actually missed your strum. It’s especially easy to overlook because it’s only noticable at all when you start missing things (I believe, but could be wrong, that the “predictive” case is that you hit the notes, and that it’s only delayed in registering misses instead of the other way around). If you never missed a note on the guitar or bass track (and I guess never used star power), you could have something truly outlandish like a five second delay to your TV and 30 minute delay to your receiver, and you wouldn’t know the difference (other than the 30 minute load time before the song!).
When playing the drums, it’s not any worse until you get to the drum fills. Now we have a real problem, because now it’s not just the “known” audio of the music track (which we’ve described above how we handle), it’s also the direct response to every pad you hit playing back to you, the “unknown” user input, that’s now expected as a very audible part of the song. There is no way to predict or compensate for this lag. Consider it completely outside the context of the song. In freestyle drum trainer mode, it’s still the same. If your surround system takes 50ms to process the signal from the console out to the speakers, it will never ever play your drum sound exactly when you hit the pad, it will always be that 50ms late. This gets distracting because you’re (probably) trying to play your fill to the beat of the song, but that beat is offset internally (as described above) to get our three core parts of the experience in sync, while your sudden freestyle fill cannot be compensated for at all and your snare hits are now playing back through the system quite clearly off the beat.
And now consider singing, where your voice through the entire song cannot be adjusted at all for lag, so you’re dealing with a constant echo effect of your own voice through the speakers noticeably later than the song’s vocals and hearing your own voice “live”. I’ve found this can only truly be managed by adjusting the volumes and turning you voice coming out of the speakers entirely off and just belting out into the room loud enough for everyone to hear you “live” over the game. It’s not good.