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This paper presents the recent achievements and main results of the optical packet switching node with label swapping capabilities that was developed in the framework of the IST-LABELS project. The implemented functionalities allows the routing and forwarding of optical packets at 10 Gb/s based on the information conveyed in the 18 GHz-subcarrier multiplexed (SCM) label at 155 Mb/s. Specific functions of the optical packet switching demonstrator such as label extraction and rewriting are based on high-performance fiber Bragg grating filters (FBG) whereas semiconductor optical amplifier (SOA) based wavelength conversion allows payload 2R regeneration. Advanced aspects implemented in the high speed electronic control unit such as traffic shaping, multicast, and for the first time to our knowledge, a contention resolution algorithm with priority processing are thoroughly described in this paper. This paper also presents simulations exploring the effect of these advanced features in the global performance of an optical packet switched network. In particular, we found that the contention resolution algorithm based on parallel converters with 16 wavelengths contributes to improve up to four orders of magnitude the packet loss rate for low traffic loads whereas the improvement from traffic shaping policies was of 1 order of magnitude for both low and medium traffic loads. Along with the experimental results, the feasibility of the approach as the basis for the next generation internet networks is demonstrated.