Mouse Lag Fix
Trying to draw in PhotoShop lead me to discover the reason for my mouse’s unresponsiveness of in games. While using PhotoShop I noticed my mouse wasn’t moving smoothly.
Under Windows XP’s mouse properties I disabled “Enhanced pointer precision” and my mouse started behaving properly in PhotoShop. Further testing showed that the mouse lag in games was also gone.

Update:
I found some more info on this problem in the Microsoft Knowledge Base unfortunatly they didn’t have a better solution.