I am experiencing an FPS drop when NPC's are nearby, I'm think this points to my CPU but I would have thought my set up would be able to run oblivion at higher settings.

CPU: Intel Core 2 Duo E8400 3.00 GHz
GPU: Nvidia 9600GT with 1gb of Vram
Mobo: Asus P5N-D
RAM: 4GB

Any thoughts on why NPC's would be giving me sizable FPS drops? Could it be down to my motherboard bottlenecking my CPU?

Thanks in advance. :]

NPC's are resource hungry. A lot of them on-screen/in the area at once (IC waterfront for example) will indeed give you slowdowns. What kind of framerates are we talking about here though?

From 60 FPS to 30 - 40, less in some places. This is without any texture replacer and with streamline/script optimization etc. I was hoping to revisit Oblivion and use some mods to increase my enjoyment of it. I have the feeling it's my motherboard since it is quite cheap. Do you think so?

Thanks for the speedy reply :]

Possibly footfall/audio problem. Have you checked your audio drivers to see if there is an update?
http://drivers.softpedia.com/get/SOUND-CARD/REALTEK/Realtek-ALC883-Audio-Driver-V51005296.shtml
If the above does not work for you, try this one.
http://www.realtek.com.tw/downloads/downloadsCheck.aspx?Langid=1&PNid=24&PFid=24&Level=4&Conn=3&DownTypeID=3&GetDown=false#High%20Definition%20Audio%20Codecs

I don't know if by NPC's you mean humans or just all AI, but this *may* help it a little bit, as all animals should cause less stuttering
http://www.tesnexus.com/downloads/file.php?id=12331

Don't use the script optimization mod. it has issues of its own, and doesn't help performance.

Sorry, by NPC's I mean humans, I am not experiencing slowdowns when animals are around,only in cities etc. Thanks though. :]
I have the most up to date Sound drivers and GPU drivers also. And I will try disabling the script mod.

30-40 in cities (like the waterfront....) is actually quite good. The engine isn't exactly 'state of the art', nor was it optimized well, even for when it came out. Actually, I suspect what you are seeing is normal......

Oh right... Well that's a bit of a downer. Thanks for your help anyways :]

You don't need anything more than 30-40 FPS for this game, that's a very acceptable framerate. Even dipping as low as 20-25 FPS will give you fairly smooth gameplay. Even people with high end rigs find that there's a point where their performance just doesn't show any further improvement. So I'd suggest you just live with it.