This still makes no sense for me, but I've found a way to get rid of all my stuttering/choppy performance on Kotor 1 & 2.
What I did was........
I started Kotor, loaded a game normaly. I was getting something like 18 fps on mostly anywhere in either Kotor 1 or 2, no matter what display settings I used. Then for some unknown reason, I minimized the game, launched Task Manager, and set the process priority for the game to Above Normal.
After doing that, the stutter was still present, but after I returned the game to Normal priority, it was so smooth it felt like I was watching a movie or something.
Now everytime I start Kotor, I minimize, lauch Task Manager, set process priority to any value (doesn't matter, I usually set it to Below Normal), and then set it back to Normal priority and the game plays super smooth. It works all the time with me, and I can't figure out what I does to have such effect.
My specs:
Athlon XP 1700+
1024mb PC2700 Ram
GeForce Ti4200 128mb
SBLive X-Gamer (using KxDrivers)
Maybe someone else could test this method and see if it improves something.