I just got done with a weeks worth of troubleshooting this problem, and finally found the solution. My problem wasn't simple mouse latency. Moving the mouse cursor in the game actually stopped the game animation and audio until I brought the cursor to a rest. I trust this is the problem most people are having in this thread, but some may not. My solution was to uninstall and Re-install Steam. It has to do with the overlay that steam puts over all it's games so that you can chat with friends and use steam from within a game. To read what I went through arriving at this solution, read on. Otherwise, good luck, and I hope my post helps your problem.
My problem only happened when in 3 monitor nvidia surround mode. It happened no matter if the resolution was 5760x1080 or 1920x1080. If I had it configured to 3 monitors and a game was running, the FPS dropped to 0 every time I moved the mouse no matter if I was in a menu or if I was in the actual game. I could literally bring the game to a stop if I kept the mouse moving in a circle. I found that rolling my Nvidia drivers back to 296.10 fixed the problem, so at that point I was sure that it was an nVidia driver problem, and proceeded to send in a bug report to nVidia. I had tried updating mouse drivers, bios settings, etc.. If you do every combination of searches for "nvidia surround mouse lag" in google and research every post that comes up with that search, that's what I did, and I tried everything I found, including buying another mouse and overclocking my current ones to a higher DPI. I was resolved to do a fresh install of Windows tonight when I figured I would do a little more digging. I am primarily a steam user, but I had one or two non steam games installed at the time, but I hadn't played them in quite a while. I was pretty certain this was a DirectX or OpenGL problem as well, so I kind of disregarded them since they were somewhat "simple" games. Not leaving any stone unturned, I tried minecraft and stretched the window out over the 3 screens and it worked fine. I fired up a game that I got from GOG.com, and it worked fine as well. It was at this point that I realized that I hadn't completely ruled out Steam as the culprit. I recently had tried out their new "console" interface for use on TVs so I quickly opted out of that, and tried to restore it to it's original format, and fired up a steam game. The problem was still there. I tried to fire up a steam game directly from the EXE files in their folders, but couldn't get any game to launch without it launching steam. I went into offline mode and still the problem was there. Finally I said "screw it" and uninstalled steam. I crossed my fingers, and reinstalled it... and loaded up one of my test games that I had been trying that wasn't too big of a download "Farming Sim 2011" (I'm a nerd, get over it) and the problem was COMPLETELY gone. I can now enjoy the most recent NVidia Drivers as well as surround mode and not have annoying mouse lag. I'm not certain as to whether the problem was a faulty steam update, or steam file corruption, but Steam was the problem. I will be posting this exact post on all other forums that I referenced over the last week, as it looks like this is a common problem without many hints at a solution.
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