Okay, I have the "lag" problem, but in an area nobody's seemed to mention. Peragus. All over the station, in fact, especially when you reach the mining caves and such.
Here are my specs (not the greatest):
AMD Duron 1.3 GHz
512 MB DDR RAM
ATI Radeon 9600 XT (Overclocked)
Windows XP (No SP1 or SP2)
I had the same issue on Dantooine in the first game, and I solved it by using the Catalyst 4.2 OpenGL driver in the KOTOR directory. I tried the same with KOTOR 2 and it doesn't help. I've also tried using Disable Vertex Buffer Objects=1 in the swkotor2.ini file and that also has not worked.
Currently I'm using Catalyst 4.11. Anyone have suggestions? Or is it just my hardware? Because I swear it played the first game fine and KOTOR 2 doesn't look more graphically intense than the first.