Until you got outside in Taris city and it slowed right down.I'm not sure why you would expect a CPU-limited title (using CPU-limited settings) to perform better with a GPU upgrade... I've played KOTOR on my X1650XT @ 1280x1024 w/all settings maxed and it ran fantastically. This would've been last year on a 7-series driver.
I didn't see any difference when I completely upgrade my computer recently. Sure, Kotor is not going to be using both cores of my new CPU, but a single core of my 6400+ is still 1ghz faster than my old 3500+ was.
I think we aren't a million miles away from agreement anyway, I get the impression that you know the default OpenGL performance is not great, but you are happy with the fact they can fix it, and to be honest so am I as far as gaming is concerned, but I would still like the performance bringing up to an acceptable level for my other interests.