Alright Lhino I had this EXACT same issue and it took me a bit to fix it. But here it goes:
If you haven't read already, Ars Technica had a piece that went into the issues that they found with the PC version. There they talked about a little program that decrypted the .ini files and then encrypted them back after you were done editing called 'BulletStormINIeditor.exe'. (google it)
After you've gotten that open it up and go to the config files. The ones you're looking for (and for some reason this location was NEVER mentioned in the Ars piece) are located in '..\\Documents\\My Games\\BulletStorm\\StormGame\\Config'.
For your problem you're looking for 'StormInput.ini'. And in there I would first HIGHLY recommend switching 'bEnableMouseSmoothing=true' to 'bEnableMouseSmoothing=false'. Then save! It's just a couple of lines down. However, if you want you can select the entire thing, then copy and paste into word (or something) and search for it to make it easier. (This also helps if you start changing other things like texture streaming values, FOV, frame smoothing, etc..) What's nice is the program makes a backup for you when you first change and save something.
That seemed to be what the issue was for me. Hopefully it helps you, too!Edited by Virus_Shell - 2/26/11 at 1:31am