CPU Bottlenecking Issues

there should be no issue, i play BF3 on ultra with a HD6950 and i have a AMD phenom II 955, which would bottleneck well before your CPU.

could just be a relative issue with the hardware match up, but even still my buddy has that same CPU with a GTX 680 classified and has no issues, even across three monitors

Well according to PerfOverlay, the GPU is clearly not the problem here. I tried overclocking and underclocking my CPU but the chart still shows huge CPU spikes. I also reset all of my bios settings to default, which had no effect.

Keep an eye on the CPU temperatures. Might be the cooling. In case it's too hot, clean the fans. They gather up dust if wires are not managed properly. And this hits fps heavily.

And, by fps drops you mean that fps gets real low? Or is it that fps overlay shows 60 fps constant, yet it feels as if it's stuttering?

The FPS drops to 45-50, which feels really bad when playing. The overlay shows that the GPU and CPU are out of sync; the lines are supposed to be right over each other.

My CPU temps maxed out around 65C, so I doubt heat is the issue.

But those max and min readings show a maximum of 38% of CPU usage [How come? Did you just join the server? It should be a lot higher than that].
So that's not a CPU bottleneck I suppose.

Turn off V-Sync, in game as well as in N-Vidia Control Panel and see if it helps.
Edit:
And Windows 8 might be an issue. You should try to downgrade to 7 [make a dual boot may be?] if you can.
Also, try to monitor all the cores of your CPU separately. If it is 100% on two of the cores, it's normal to get real low usage on other cores. Might just be the game.

Wait wait wait, 670 mhz RAM??

PerfOverlay doesn't show the GPU and CPU usage, it shows the frame render times. Ideally both the CPU and GPU max on the chart should show as 16, which would mean no lag. I'll try monitoring all of my cores to see if it's a BIOS setting problem.

My RAM is actually 1333Mhz, not sure why it says 670.

hmmm maybe beacuse your cpu is overclocked. Did you overclocked that I7 yourself or did you use some software? There some motherboards (like some MSI) that can overclock the cpu automatically but then leave your RAMS at strange frequencies.

I have it overclocked in the BIOS. I also reset my CPU back to stock speed, but the performance is more or less the same. Now I'm getting consistent spikes  

D(ouble)DR ram guys = 2x670mhz -> 1340Mhz

did you close down any other applications running that might cause it?
is your internet connection up to par?

it obviously is not your CPU or GPU

I don't have any other applications running that could cause this issue. My internet connection is 65/10, and I'm playing on low ping servers. My CPU is the only part of my PC that is limiting my performance in game, as shown by the perfoverlay graph.

I just learned something new. Thx  

it should run like a charm... I'm taking you've installed all the latest drivers?

Re-install the game in a drive different from the one which has the OS.

It need not be the CPU in the game. Can be the CPU out of the game. Try using a Game Booster, or disable services using msconfig.
Lower down all settings, and see if it stops the lag. If it does try to find out which setting is causing the problem.
Also, play the game offline [Single player] and see if the lag's still there.

Important: On N-Vidia Control Panel, lower "Maximum Pre-rendered Frames" to 1, and "Power Management Mode" to Maximum Performance for BF3.

Lastly, try to turn off Hyper-Threading from BIOS.

Also, for better tracking of CPU and GPU usage use MSI Afterburner. Keep it on in the background.

Rick