Bioshock is awesome! Just had to say that before i go on...
Sounds to me like a graphics driver issues - are you changing those around alot? I remember this kind of lag happening in a few older games, including DeusEx2, PainKiller, and the old Half-Life2 *cough*alpha-leak*cough* back when i was using a GeForce5600 - but with an 8800 i can't see having the exact same issue... With my current 7950, there are some nv drivers that bring doom3 engine games to a slide-show, so i have to watch out what drivers i am using. From my experience, 94.x drivers work well with openGL, while 16x.x drivers cause slide-show - could also cause mouse-lag i guess.
So - what is your gfx card again and what drivers are you using?