What is the best course of action if the generated lip files, just don't match up to the audio worth a darn? For one of mine the NPC briefly cracks his mouth open and just leaves it there for the duration of the line.. some others are fine.
You ought to have as clean sound as you can possibly get :-/ Think of it this way: If you were to repeat something from an old audio tape, in which you can only hear a clear word every now and then, how well'd you manage?

Also, if there is a word in the sound file, e.g. "isn't", then it should probably be changed to "is not". I've noticed this causes less problems. The Response Text in the Dialogue Editor can still hold the shorter phrasing. BTW, Did you remember to write the text to the Response Editor at all before creating the .lip files?