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Wavelet packet transform-based optical OFDM (WPT-OFDM) systems can be used as an alternative approach to the conventional optical OFDM systems. In this paper, we investigate the performance and limitation of real WPT-OFDM systems. Its double-sideband characteristic makes it sensitive to spectrally non-symmetric dispersion such as polarization-mode dispersion (PMD). Simulations of dual-polarization WPT-OFDM transmission are carried out in the presence of PMD, and compared with conventional Fourier transform-based optical OFDM (FT-OFDM). The results show that WPT-OFDM is very sensitive to PMD, incurring 1-dB penalty at 5-11 ps DGD for 112-Gb/s dual-polarization transmission. PAPR and nonlinearity performance of WPT-OFDM are also analyzed in this work. We show that the Haar wavelet has 0.9-dB improvement in nonlinear launch power limit compared with FT-OFDM (CP=1/8) in a conventional transmission dispersion configuration where inline dispersion is fully compensated by a dispersion-compensation-fiber (DCF).