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So I have a weird question. Certain games have speed issues regardless of what settings are used. One particular example is Call of Duty 2: Big Red One. Regardless of the graphical issues it has, it doesn't generally run well. However, if I disable the GS output - the speed will return to 60FPS.

So basically my question is this: If the game runs at full speed without GS output; does that generally rule out any core issue affecting the game's speed?

More or less, yeah.
Disabling GS output removes all rendering work, but the plugin still processes the GS packets.
The option tells you if slowdown is caused by the graphics driver, or if your GPU is too slow for the actual rendering workload.

There's a small chance that the core produces buggy packets that only slow down the system if you render them.
You would get that in buggy looking games, so beware of drawing conclusions on those.