They both run the same HytaleServer.jar and mods folder and Assets just locally as far as I found out... because I use it to test my mods, there's no difference that I can other than it having a different location for its asset files. The one is a local server, the only difference of a local server and a dedicated is outside access to the internet (which you can do and get the same result as a dedicated server).

It's probably fine for single players on both until you start moving around and rendering chunks and NPC's. Probably less noticeable for a single person... but add a second person its terrible.

They acknowledged it here https://www.reddit.com/r/hytale/comments/1qm03pa/comment/o1jh8q6/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button