It's your ISP. I'm with Tiscali and from Aug-Dec 05 online gaming was almost impossible. They went through the usual" your hardware is wrong/software settings are at faults" BS.
I build my own system, know it inside out and I hadn't moved a wire/changed software setting of anything. Full reinstalls of OS etc made no difference.
Doing tracerts during difficult periods showed the same timeouts as you. Playing CS:S I used to freeze then carry on (assuming I hadn't been wasted in the intevenining time) I'd just totally lose connection to LFS - so Valve has better netcode I guess.
It took a never ending series of phone calls/emails and time testing their latest wheeze to get me going. All of it made no difference.
I gave them rock all about contention ratios given the fact that worst service was a peak UK times when I finally noticed WHEN it happened - the evening and weekends. It worked fine in the small hours for instance.
Once I ripped them to pieces about the timings of the poor service they went away and had another look at their end - exchange or whatever an a miracle occured - the performance came back.
Bear in mind I have been with the same ISP for almost 2 years, so I got to measure the problem. If you are in the UK you should note that regardless of supplier, your ADSL goes through BTs exchanges in your local area. So not much point changing ISP...