Seriously I've gone through all the games I've ever played on this computer and most say I'm way past the recommended. When i play them though I generally have low fps and other serious problems.
System Specs:
Intel(R) Core(TM)2 Duo CPU E6750 @ 2.66GHz
Microsoft Windows XP Professional
NVIDIA Geforce 9500 GT
Realtek High Definition Audio
2GB of RAM
(Just copied whatever the website told me I had)
I see the problem, its your video card! I'm not saying the card is bad but.....there is much better on the market. You get mouse lag and such because its struggling to perform. You should think about buying another video card, probably something around the mid-upper Nvidia 200 series, or mid upper 4000 series. Both series are very good for the price, plus some cards don't require too much power from your power supply (the 9500gt was pretty low power, so I'm assuming your psu doesn't put out too much power).
Currently I am using this card:
http://tinyurl.com/662d7vw
Its pretty low power, stays pretty cool and very cheap. For mid range resolutions, I can play the majority of my games on high settings without any mouse lag, frame drops, freezing, etc. I just checked my video settings on Portal 2 and I have everything at high, very high, 4xAA, at 1440x900 res. I get over 50 fps constant

. Like I said, this card is pretty good for the price. A good example of what the 4000 series can still do, even though the 6000 series is getting off the ground.