CREATE PROC spReturnUsers
@UserName NVARCHAR(20),
@FirstName NVARCHAR(20)
AS
BEGIN
SELECT *
FROM tbUsers
WHERE (UserName = @UserName OR @Username IS NULL)
AND (FirstName = @FirstName OR @FirstName IS NULL)
END

Now I will admit I do not have a great understanding of this so forgive me if I am wrong but what happens is this, during the execution of the above script it will scan the entire table for Username = @Username and then check if the @UserName is NULL. This is when you get the terrible response times. On other hand when it runs fast it is checking to see if the @UserName is NULL right away. I believe the reason why declaring the variables locally solves the problem is because SQL Server will then always check the IS NULL portion of each line first. Whereas, if it is not declared locally SQL Server is not smart enough to look at that first.