Just retried on my system - same again. No lag whatsoever.
Then rewatched this video: http://www.youtube.com/watch?v=XeYVug9rgjU
This looks like if the game is PAUSED. The fire animations do nothing, the soldiers do not move slowly but they do not move at all.
Are you sure that it did not something accidentally trigger the pause battle button.
That would explain why moving the mouse moves the camera and it is observed as smooth - yet everything else is paused.
Maybe you are suffering from similar problems once reported with wireless keyboards that accidentally triggered all kinds of "button" without even touching them. Perhaps in your case only the pause button gets triggered and maybe untriggered as well.
The solution was to update the keyboards drivers.
Also I don't think its a GPU bottleneck or any other hardware bottleneck...but rather a something running in behind problem, did you try unloading all "c r a p" that is started with windows autostart (except system drivers) and see if that solves the issue ?