Just enabled Ambient Occlusion in the NVIDIA Control Panel to see how it looks. I thought it made some areas with foliage in caves look better but it looks pretty ugly in other situations.

Shimmermist Grotto:

Ambient Occlusion On:
[img]http://i.imgur.com/yZmLq.jpg[/img]


Ambient Occlusion Off:
[img]http://i.imgur.com/czQhf.jpg[/img]

As you can see, ambient occlusion makes it look like there is black mold growing in all of the crevices of the cave. I think I'm going to leave it turned off. Too bad, since it gives the game some nice dynamic range in certain areas.

Mmmm, I was just there but did not see this effect. I am running SSAO on High Quality using Nvidia Inspector (in the Nvidia panel you can only set it to Quality.

I'll pop in again to make sure...

EDIT - When set to Performance it shows, but not on Quality or High Quality. On Quality smoke looks funny though. Also SSAO easily makes the game stutter, so one might want to turn it off if the comp can't handle the extra stress.
END EDIT

Your view distance looks like it's fairly short, which could be why the creases look as dark as they do

As far as I know there is nothing you can do about it because that's what forcing Ambient Occlusion does to geometry. it's not a good solution because AO is not rendered by the game itself.

Oblivion Graphics Extender has (had? I wonder if they eventually fixed it) this problem too. I remember it being a technical limitation.

I don't think this is possible to fix without messing with the game's renderer on a much lower level.

To do AO right, you'd have to first run a depth-only pass of the image. The game may be already doing this since it has deferred shadows, though. Then, using a suitable ambient occlusion shader, produce an ambient occlusion mask out of that depth map, and when doing the first lighting pass on each object (or whatever pass does ambient shading on them), multiply the ambient lighting with samples from the AO mask. This way, the AO only limits ambient lighting, which is what it's supposed to do.

I think the Nvidia AO and the Oblivion Graphics Extender are generating the AO mask after things have been drawn, and then they multiply the final color values with the mask, causing the AO to darken everything, not just ambient lighting on solid objects.

http://www.skyrimnexus.com/downloads/file.php?id=11 has a pretty good solution for AO usage in Skyrim; it has worked fine for me so far:
See if that helps you any. I've been using the Performance AO mode with the MW2 setting with good results. Quality and High Quality with MW1's compatability setting looked great, but was too much strain on my system with my mod setup and such.