I unpacked the "Oblivion - Meshes.bsa" into the "in" folder of pyffi Optimization Kit v7 with BSA Unpacker. I used the http://www.tesnexus.com/downloads/file.php?id=37463
from that link.and ran the oblivion_optimize.bat exactly as it said.
It ran for like 6 hours and said it completed successfully so I did the next step, i.e. copy the "in" meshes, and then the "out" meshes into a new BSA, and set the date to 29/01/2006.
The resulting file was 1.16GB compared to the old meshes.bsa which was 659mb.
I am running on a Nvidia Geforce 310M (WHQL driver 301.42), (and 4GB DDR3 RAM, i5 cpu) which can run Red Faction Guerilla, so the hardware is working fine.
I have tried resetting the graphics settings to default, but it still crashes. When I replace the optimized BSA with the old BSA, it works fine, so the obvious reason the game is crashing is that the meshes that have been somehow messed up after processing with pyffi. But I didn't do anything seemingly wrong, or did I?
BTW, it played fine up to the exit gate at the end of the 'tutorial' section.
I still have the "in" and "out" meshes folders, so recreating them is not a problem. I just don't understand where I've gone wrong here.