Questions about updating my node.js game

I am making a little game using node.js for the server and a .js file embedded in a HTML5 canvas for clients. The players each have and object they can move around with the arrow keys.

Now I have made 2 different ways of updating the game, one was sending the new position of the player everytime it changes. It worked but my server had to process around 60 x/y pairs a second(the update rate of the client is 30/sec and there were 2 players moving non-stop). The second method was to only send new position and speed/direction of the player's object when they change their direction speed, so basically on the other clients the movement of the player was interpolated using the direction/speed from the last update. My server only had to process very few x/y7speed/direction packets, however my clients experienced a little lag when the packets arrived since the interpolated position was often a little bit away from the actual position written in the packet.

Now my questions is: Which method would you recommend? And how should I make my lag compensation for either method?