Yeah, I don't understand why the performance tanks when you enter a village. I don't think it's got anything to do with rendering the houses; it lags when there are many NPC's in the area you are in. There's something weird going on with how the engine deals with NPC's.
Ph'nglui mglw'nafh Cthulhu R'lyeh wgah'nagl fhtagn!
"The sky was the color of a TV tuned to a dead station" - Neuromancer