Definitely update your drivers to the 304.79's. They are the best in quite a while.
Never, ever again use regular VSync; always use Adaptive VSync. It is a key advancement in the technology, and specifically reduces input lag (mostly).
Your other option besides VSync is to turn up your settings as high as possible to try to hit that magic 60 FPS. Don't forget you have several levels of Transparency Supersampling and antialiasing that can be forced, which should remove some of those excess frames.
Lastly, the 260 would make a good PhysX card, but please do not install a dedicated card for UT3 when you are running a GTX 670 FTW. You should be getting 200+ FPS with every imaginable setting turned up to max, including PhysX enabled.