I posted this under the NFS lag thread as well.
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OK, I've fixed my problem - although chances are slim that we're in the same situation.
I was running the program from a batch file under windows 2000 in order to specify a process priority of 'high'. Even though I had removed the process priority switch I was still calling quake3.exe from the batch file. Running the program directly solved the problem. I guess me can assume that XP handles DOS batch files (and therefore command interpreters like cmd) diffrerently from 2K. Not hugely, but enough to play havoc with my inputs.
Cheers,
bsleek