Xcode V4.1 and at least some later versions includes a Network Link Conditioner tool, which can be used to select and simulate network latency, packet loss and related errors.
With older OS X releases, ipfw (deprecated) can be used.
Thanks, I do know about the Network Link Conditioning Tool, but it seems buggy. I've tried it on my computer and it basically has no effect. There isn't much information out there about using and troubleshooting it, but I saw something about the re-installing the prefpane (which I don't quite understand or know how to do), and/or restarting the computer.
Besides, I don't think that really resolves the issue. Even if the Network Link Conditioner did work, I would wager it would only function on just the computer, and not carry over to the Internet Sharing.