If you instanced the object using alt-D, then no: there is no real difference between linking externally, as far as I am aware.
I created an Ant landscape of ~4.2 million faces, and instancing this three times works fast (real-time, no lagging). Undoing a move takes around 1.5 seconds. Adding more instances with alt-D doesn’t slow down the undo markedly.
Even with 22 instances the undo takes about the same time to finish (slightly slower perhaps). The viewport is displaying 22 x 4.2 = 92.4 million faces, and things are smooth to work with in object mode.
Of course, entering edit mode is slow, and while the viewport remains as responsive, editing a 4.2 million faces mesh is incredibly slow to work with on my machine.
Aside from the slow Undo, mesh edit mode is the second bottleneck currently. But thinking other (commercial) 3d software will do a better job is just not true.
I opened the same Ant generated landscape in Lightwave 2019 and Cinema4d R20.
In Blender it takes ~3 seconds to translate one polygon in the z axis. Selection is as slow, indicating that selecting in Blender also loops through the entire mesh, it seems.
In Lightwave Modeler selecting is indeed much faster compared to Blender (realtime), but transforming (moving) a polygon was as slow, if not slower because finishing the move takes longer. Trying to edit this object in Lightwave is just as slow, if not worse due to the lags finishing the operation.
Cinema4D R20 fares little better compared. Pre-selection highlighting is instantaneous, but actually selecting a polygon takes almost as much time as in Blender.
And it still takes 1.6seconds to translate a polygon (proof: C4D enters wire box mode when an operation takes more than 1000ms: I changed the value to 1.6s, and only at 1.7s did it continue to display the mesh while transforming) . Twice as fast as Blender and Lightwave, but still unusable to work with this mesh.
Undoing a single polygon move is indeed much faster in C4D compared to Blender: around 2 seconds versus 11 seconds.
For kicks I entered object mode in C4D, and scaled the mesh in one axis. Very slow performance. In Blender this is butter smooth in object mode. Undoing this move in C4D took just as much time as in Blender.
An answer to modifying this mesh in Blender is Sculpt mode: use a small pull brush, and start pulling polygons in butter smooth real-time feedback. It just works as expected. And undo is instantaneous.
Lightwave? Forget that, LW doesn’t offer any sculpting tools. Or at any rate, lacks an optimized sculpt mode.
Cinema4D has sculpting tools, however. But you will be severely disappointed by its performance with this mesh: it is dead slow and lagging - in short, unusable. Blender’s sculpt mode is light-years ahead in performance.
Anyway, things are not as bad as they may seem. In my opinion with organic high-poly meshes sculpt mode is the answer for quick edits. It would be nice if Pablo could add polygon selection tools in this mode. It would de-facto solve this problem for now. (edit: the existing transformation and masking tools already allow us to work like this for the most part in the latest builds).
When working with hard surface modeling: divide and conquer. Place components as individual objects, and performance is great/good. Way better than C4D, for example, which just gives up with many objects.
This testing was done on an aging 11 year old i7 920 overclocked to 3.6Ghz, 48gb ram, and a GTX 1080.
