Always good to have a moan, I may have found the issue, always the bleeding obvious that is missed.
I recently upgraded my local firewall and AV which I now suspect is causing no end of issues with IIS, disabling the Firewall and AV resolves ALL issues so there is obviously some underlying security issue somewhere with the AV/Firewall (AVG 2012) which is causing the bottlenecks and lag.
I would recommend anyone who does have similar issues to check this first - as soon as I disabled the firewall and AV, everything was responsive again, in fact performance was great.
I will investigate this off-topic and find out why AVG is causing an issue.
Thanks and please excuse the rant!