I'm with Enzo. He pretty much hit the nail on the head. BTW, how much RAM do you have and in what configuration?
You could also try to overclock your e8400 to 3.6 Ghz (does it easily) and see if that helps. If I had to pick which of the two, your CPU or GPU, is more responsible for the lag, I would say your GPU has to wait more for the CPU meaning your CPU can't keep up with your GPU. I've used the same combination and at 3.6 Ghz all the way to 4 Ghz, I was able to get more, faster framerates out of my GTS 250.