Windows 7: Counter-Strike: Source lags?

This might sound odd but have you also tried to run the game in a lower direct x setting?
-dxlevel 95 to run 9c
-dxlevel 90/81 for Direct X 9 and 8.1 respectively.
If you do have all your latest direct x files that could help you render the game better.

A while back I had a very similar bug with CS:S using a Nvidia card. It turned out to be a bug with the control panel. If I used the card driver to manually set settings in the game, it ran terrible and skipped around. I fixed the problem by going into the nvidia control panel, selecting CS:S and setting it to all default settings, from there the game ran perfectly, and I set my graphics options from within the game.

I can't test if this is still the case, I haven't used Nvidia for over a year, but the card was very similar.

This may not be the case but I think it's worth posting.

Does your antivirus have a gaming mode.

Hey guys, just wanted to let you all know that I did upgrade my CPU and the game runs fine now.

I went from an AMD Phenom X4 9600 running at 2.3GHz to an AMD Phenom II X4 940 running at 3.0GHz.

I play the game with an amd phenom 9950 at 2.6ghz and I run fine. Thats a little strange how it didnt run well with a 2.3 ghz processor...

I guess the CPU and motherboard combination wasn't that great. I've also read that the Phenom X4 9600 has some speed issues and doesn't work as great as it says.