I used to have mysterious lag and rubber banding. Like you, I have a good internet connection and pc that meets the requirements. I was at a loss trying to figure out what was causing my problems.

Until someone suggested I try turning off In-Game Voice Chat. And BOOM... all problems disappeared.

Try it, might work for you - Options -> Voice Chat -> Disable Voice Chat (checked)

Tried the in game voice chat settings to no avail... ...also instead of just exiting the game like I normally do I just signed off, even had the lag I am describing at the character selection screen....

The character selection screen doesn't use much if any bandwidth. So I'd say you do not have an internet connection problem at this point. Your friends say you don't appear to be lagging so that means your client is communicating ok with the server.

Sounds like more of a hardware issue to me. I'd start with checking for excessive disk activity when the "lag" occurs.

This all sounds like video card issues to me. What vid card are you running?