ipTables: How to improve the current set-up?

If the hang is caused when you login then it is probably related to the sshd UseDNS configuration parameter. The default for this is yes so sshd does a lookup on your client's hostname and then checks that it maps back to the IP address that is is seeing on the inbound connection.

You'll probably find that you don't have a suitable DNS PTR record for your client.

Try setting

UseDNS no

in your /etc/ssh/sshd_config file then restart sshd.

Here is a basic gist of what I am doing, https://gist.github.com/801684. It's commented and I've never seen any connection slowdowns. But, make sure you have console access before mucking with firewall rules :)