I seem to be losing considerable FPS when looking at NPCs, and I was wondering if this is due mainly to the CPU or GPU.

My Processor- Intel Core 2 Duo 2.33Ghz
My Graphics- ATI 5570 1GB Sapphire

Thank you.

NPCs AI packages are all processed on the CPU, so that would be the main reason probably.

I'm not entirely convinced it's the CPU. I ran Oblivion without lag everywhere that wasn't Wilderness on lesser processor (Athlon 64 3500+ @ 2.2GHz).

Try updating your video card drivers or lowering the graphics settings. See if that make's a difference.

http://support.amd.com/us/gpudownload/Pages/index.aspx

Select Desktop Graphics ---> Radeon HD series ---> Radeon HD 5xxx Series PCIe ---> Whatever operating system you're using.

If you don't know wether or not your OS is 32bit or 64bit, click the Windows logo in the bottom left. If you're running XP, click on Run and enter dxdiag in the window that pops up. If you're running Windows 7, enter dxdiag in the search bar (it's near the bottom). If you're using Vista, it's probably one of the two. I never used it, so I can't guide ya.