When I got to the blue line statio. mission i got to where you pick up the tnt bundle and mutants attack but then the game lags so bad its unplayable!!! When I pause or use engineering there is no lag, only when i actually play meaning I'm not at the main menu or paused since the pause screen doesnt lag. Theres no scratches since the game is new. Help!!

Do you have the game installed to the harddrive or is it running from the dvd?

If it is running from the dvd: Do you hear lots of drive activity when performance goes down? Even if there are no scratches on your dvd, there might be a problem with your drive reading it.

Btw.: The xbox 360 might use space on your harddrive for swapping data even if you haven't got the game installed.
How much space is left on your harddrive ?
I noticed that some games slow down when the harddrive is almost full. Duke Nukem Forever for example runs worse the less space there's left on the drive.