the lag will likely be cause by to many fps... yes to many can be just as bad as to few. because as you point out your getting 100-200 so the fps droop will be massive.
to get smooth gameplay your best of limiting the fps to 60 via vsync or 120 if you have a 3d monitor.
you will only ever get smooth gameplay when you limit the fps droop to 5-10 fps any more than that and your game will visually stutter.
reason being because when a game is putting out 200 fps its changing the gfx 200 times then you get a drop to150 you loose 50 frames of animation so what was smooth looks like a jump/hicup where as if you were getting 60 fps and dropped to 57 the difference in the screen render wouldn't be enough to stop fooling your brain into thinking the update wasnt smooth.
so yeah limit your max fps to what ever the minimum is or if you cant do that then limit it to 60.