An image speaks for a thousand words:

[img]http://filesmelt.com/dl/tiks9.png[/img]

We need to optimize that. It's only a part of the whole city (there's even more after that) and it lags like a beach. Anyone have any suggestions?

Add some trees, plants and such. I have to say it looks very nice already.

If you mean you want it to look like a city but have less drag on the fps then you've hit the problem I had with the Agaria section of the capital city in Mesogea. I have about forty to eighty NPC's wandering in and around at various times and the fps hit can be considerable but there are ways to optimise it but it takes work.

First it can be the number of vertices on models, statics etc. Open each static mesh in nifskope and see which ones are detail heavy, then replace them with another thats less. ie. some farmhouse with masses of detail, another with less detail, replace.

Set your NPC's to varied times, dont have them all pile into the streets at one time. You want it to look and feel busy but without having a mass crowd dragging the fps down. I staggered the appearance of my NPC's, one came out into the market at 0800-1000, another 0900-1100, another 1000-1200 and so on, criss crossing paths and going to other parts of the city, the NPC's look as if they have a purpose, they vary and are only in an open space for a few minutes.

Cut down on the active meshes such as flames, lamps with flickering fire, smoke etc.

Run fraps and stand in the centre of the area. Roll the camera around and find which direction really whacks your fps, locate the offending section and replace the meshes in it.

You seem to have a lot of detailed meshes in there, such as rocks. Skyrim looks no different to Oblivion to me, it isnt geared up for performance and crowded areas, its geared to high detail, great imagery etc and that doesnt fit with a busy town. When I make my models for Mesogea I aim for as few vertices as possible, the less the better, using the texture maps to add detail. You could do your own custom meshes along the same lines, though it takes time and effort. The result for me with Mesogea was to be able to near on double the number of NPC's and make areas look crowded. The player is more focussed on the NPC's and the mega picture rather than minutae such as door handles being a textured addition than a mesh.

We can't use portals in there, can we?

http://www.1337upload.net/files/optimization.png

?

For exteriors, at least in Fallout, you were supposed to use Multibounds and occlusion planes, which are kind of like a slightly different, exterior version to portals. You place a multibound, and if it's entirely behind an occlusion plane, nothing within it is rendered. Random spots of your city will still always be rendered, but you can occlude large chunks.

Also, this is why Bethesda made city interiors separate worldspaces, so if your's isn't, that's part of the issue.