Thanks guys. Yep, looks like from what Pika pointed out it's normal behavior.
Question for C3: do you normally run your computer with UAC on? I have Win 7 64bit Pro with UAC turned on. I'm wondering if this has something to do with some of my troubles.
Also, I tracked down what seems to be another source of lag on my system. I had tweaked some of my Fire Fox network settings via the about:config menu a while back and had some none-default settings. I started wondering if FireFox was not keeping extra connections running in the background as I played. The latency issue did seem to get better after resetting all network. settings to default under about:config.
Final significant source of lag seems to be coming from setpoint drivers. Just bought a Razer Abyssus. Will be making some comparisons once it gets here.