When ever I look around in game there is quite a delay in the mouse movements and when the screen changes. Even when I pause the game there is lagg on the menu screen.

I'm playing skyrim at mid settings as were recommended. Intel i5-2410 2.3Ghz, 4 GB RAM, Windows 7 64 bit, Intel ® HD graphics family Approx total memory 1760MB.

Any help would be greatly appreciated.

Have you disabled 'Xbox 360 controller' in-game option?

Also,

Open the 'SkyrimPrefs.ini' file with notepad
Find the line "bMouseAcceleration=1" (located under [Controls])
Replace the 1 with a 0
Save the file (make sure you don't accidently save it as Skyrim.ini.txt)

Try that.

Thanks Nemesis that worked.

To anyone who dosent know how to locate SkyrimPrefs.ini' file. Go to your Steam Directory -> steamapps -> common -> skyrim -> Skyrim

Let the Quests begin:D

Seems this line bMouseAcceleration isn't added by default, because I don't have it in Skyrim prefs...