I will relate this question to why MMO use UDP over TCP. The reason being that UDP promises fast delivery whereas TCP promises guaranteed delivery.
A similar analogy can be applied to a single-threaded vs a multi-threaded model.Regardless of which you choose, your overall CPU cycles remain the same i.e. the server can process only so much information per second.
Lets see what happens in each of these scenarios
1.Single-Threaded Model :
In this, your own implementation or the underlying library will end up creating a pipeline where the requests start queuing. If you are at min load, the queue will remain virtually empty and execution will be real-time, however a lot of CPU may be wasted. At max load, there will be a long queue-up and execution will have latency with increasing load, however delivery will be guaranteed and CPU utilization will be optimum. Typically a slow client will slow everybody else down.
- Multi-Threaded Model :
In this, depending on how your own implementation or the underlying library implements mutli-threading, parallel execution of requests will start happening. The catch to MT is that it's easy to get fooled. For example, java.util.concurrent.ThreadPoolExecutor doesnt actually do any parallel processing unless you set the queue size to a low value. Once parallel processing starts happening, at min load, your execution will be superfast and CPU utilization will be optimum and game performance will be great. However, at max load your RAM usage will be high and CPU utilization will still be optimum. Typically you'll need to put thread interrupts to avoid a slow client hogging all the threads, which will mean glitchy performance for the slow client. Additionally as you start exhausting your thread pool and resources, threads will either get queued or just get dropped leading to glitchy performance.
In gaming, performance matters more over stability, hence there is no question that you should use MT wherever you can, however tuning your thread parameters to compliment your server resources will decide whether its a boon or a complete bane