this program is very useful for optimizing meshes and boosting stability/performance in Oblivion. Fallout 3 and Oblivion use the same engine(although fallout 3 uses a slightly newer version). Would this tool work on fallout 3? would there be any advantages of doing so?

Yes it does for static meshes in the architecture, clutter, dungeons, furniture, and landscape folders. Don't be a fool like I was and PyFFI the entire Fallout - Meshes.bsa contents. It was over 24 hours of processing for a result of crashing in exteriors. I think the advantage is clear when you set your draw distance high and your comp has to load and render all these high poly objects with extra vertices. You may notice it when looking at vistas with lots of buildings.

Does it provide a noticeable increase in performance? It'd be really nice to know whether or not it would be worth spending several hours waiting for it to finish optimising.

Well the best advice for PyFfi-ing is to do it while you sleep
People who have done the static meshes don't report as much as an improvement as for Oblivion, if any. Presumabely this is due to FO3's actuall dual core use

I don't think so. I tried it out on some of my Wasteland meshes and there wasn't any substantial difference like there was with Oblivion. In fact, quite often the meshes would end up being larger than before. It looks like Fallout has already had it's meshes optimized, making PyFFI redundant for this game IMO.

what about meshes added by mods?

edit: i tested this program on two mods that i was having trouble with, dimon's type 3 bodies (high resolution version) and the js spartan mod. With both mods after using pyffi i noticed a large increase in performance around these models. Before when i would look at them in game it would result in the frame rate falling by 10-20 fps, not the fps drop is maybe 2-5 fps. As far as i can tell there is no visible loss in quality