You're right, I've argued with a few of my friends over this in the past. Also, something I should have mentioned before (and I should correct myself), the refresh rate on a LCD screen isn't quite the same thing as that on the CRT. So, even though a 120Hz LCD would refresh the image 120 times a second, for some reason it just doesn't feel as nice and fluid as on the CRT.

That v-sync mouse lag I mentioned has only ever happened to me when I'm using an LCD rather than CRT - which is the main reason why I wouldn't use v-sync when playing an FPS.