>the server would have to do occlusion tests for each player pair, but a bounding box and some reasonable spatial partitioning should make that reasonably efficient.

Shadows and reflections are the hard part. Especially when light can be cast by your own/other players' weapon. It gets even more complicated with ray tracing becoming common.

Good point, there's also sound. I suppose ultimately only server side rendering could solve that... although that is a thing now.